Volatility forecasting: the role of internet search activity and implied volatility

Arabinda Basistha (), Alexander Kurov and Marketa Halova Wolfe

Journal of Risk Model Validation

Abstract: Recent empirical literature shows that internet search activity is closely associated with volatility prediction in financial and commodity markets. In this study, the authors;search for a benchmark model with available market-based predictors to evaluate the net contribution of internet search activity data in forecasting volatility. The paper;conducts in-sample analysis and out-of-sample forecasting analysis robust to window size in multiple markets for robust model validation. The predictive power of internet search activity data disappears in the financial markets and substantially diminishes in the commodity markets once the model includes implied volatility. A further common component analysis shows that most of the predictive information contained in inter- net search activity data is also present in implied volatility, while implied volatility has additional predictive information that is not contained in the internet search activity data.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-of-risk-model-validat ... d-implied-volatility (text/html)

Related works:
Working Paper: Volatility Forecasting: The Role of Internet Search Activity and Implied Volatility (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ5:7378466

Access Statistics for this article

More articles in Journal of Risk Model Validation from Journal of Risk Model Validation
Bibliographic data for series maintained by Thomas Paine ().