The information content of short-term options
Lazaros Symeonidis () and
Chardin Wese Simen
Journal of Financial Markets, 2019, vol. 46, issue C
We exploit weekly options on the S&P 500 index to compute the weekly implied variance. We show that the weekly implied variance is a strong predictor of the weekly realized variance. In an encompassing regression test, it crowds out the information content of the monthly implied variance. Further tests reveal that the weekly implied variance outperforms not only the monthly implied variance but also well-established time series models of realized variance. This result holds both in- and out-of-sample and the forecast accuracy gains are significant.
Keywords: Implied variance; Predictability; Realized variance; Weekly options (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:46:y:2019:i:c:s1386418118303057
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