Forecasting Stock Return Volatility: A Comparison of GARCH, Implied Volatility, and Realized Volatility Models

Dimos S. Kambouroudis, David G. McMillan and Katerina Tsakou ()

Journal of Futures Markets, 2016, vol. 36, issue 12, 1127-1163

Abstract: We investigate the information content of implied volatility forecasts for stock index return volatility. Using different autoregressive models, we examine whether implied volatility forecasts contain information for future volatility beyond that in GARCH and realized volatility models. Results show implied volatility follows a predictable pattern and confirm the existence of a contemporaneous relationship between implied volatility and index returns. Individually, implied volatility performs worse than alternate forecasts, however, a model that combines an asymmetric GARCH model with implied and realized volatility through (asymmetric) ARMA models is preferred model for forecasting volatility. This evidence is further supported by consideration of value‐at‐risk. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 36:1127–1163, 2016

Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (35)

Downloads: (external link)
http://hdl.handle.net/

Related works:
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:wly:jfutmk:v:36:y:2016:i:12:p:1127-1163

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().