Historic risk and implied volatility

Mehmet F. Dicle and John Levendis

Global Finance Journal, 2020, vol. 45, issue C

Abstract: This study extends the volatility prediction literature with (1) new intraday realized volatility measures and (2) various implied volatility indexes for commodities, currencies, and equities. Predicting volatility is important for academics, investors, and regulators. Applications range from forecasting stock and option returns to constructing early warning systems. Using twenty-three Chicago Board Options Exchange VIX indexes, as opposed to the common S&P 100 and S&P 500 equity indexes, we find a bidirectional lead-lag relationship between implied volatility and realized volatility. The lead-lag relationships are more robust and stronger using suggested intraday volatility measures than using the interday volatility measures that are common in the literature.

Keywords: Volatility; Implied volatility; S&P 500; VIX; CBOE (search for similar items in EconPapers)
JEL-codes: G12 G14 G17 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:45:y:2020:i:c:s1044028318301625

DOI: 10.1016/j.gfj.2019.100475

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