Forecasting volatility of futures market: the S&P 500 and FTSE 100 futures using high frequency returns and implied volatility

Jaesun Noh and Tae-Hwan Kim ()

Applied Economics, 2006, vol. 38, issue 4, 395-413

Abstract: We show that historical volatility from high frequency returns outperforms implied volatility when standardized returns by historical volatility tends to be normally distributed. For the FTSE 100 futures, we find that historical volatility using high frequency returns outperforms implied volatility in forecasting future volatility. However, we find that implied volatility outperforms historical volatility in forecasting future volatility for the S&P 500 futures. The results also indicate that historical volatility using high frequency returns could be an unbiased forecast for the FTSE 100 futures.

Date: 2006
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DOI: 10.1080/00036840500391229

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