The information content of Chinese volatility index for volatility forecasting

Zhe Li, Wei-Guo Zhang and Yue Zhang

Applied Economics Letters, 2021, vol. 28, issue 5, 365-372

Abstract: In this paper, we investigate whether the model-free implied volatility index iVX officially launched by the Shanghai Stock Exchange has incremental explanatory power for future volatility in the SSE 50 ETF. In particular, we concentrate on Heterogeneous Autoregressive model of realized volatility and iVX (HAR-RV-iVX). We use both in-sample and out-of-sample predictive regressions to empirically indicate that the iVX significantly improves the forecasting performance of the realized volatility of SSE 50 ETF.

Date: 2021
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DOI: 10.1080/13504851.2020.1753876

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