A Comprehensive Look at Financial Volatility Prediction by Economic Variables

Charlotte Christiansen, Maik Schmeling and Andreas Schrimpf

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: What drives volatility on financial markets? This paper takes a comprehensive look at the predictability of financial market volatility by macroeconomic and financial variables. We go beyond forecasting stock market volatility (by large the focus in previous studies) and additionally investigate the predictability of foreign exchange, bond, and commodity volatility by means of a data-rich modeling methodology which is able to handle a potentially large number of predictor variables. In line with previous research, we find relatively little economically meaningful predictability of stock market volatility. By contrast, volatility in foreign exchange, bond, and commodity markets appears predictable by macro and financial predictors both in-sample and out-of-sample.

Keywords: Realized volatility; Forecasting; Data-rich modeling; Bayesian Model Averaging; Model Uncertainty. (search for similar items in EconPapers)
JEL-codes: C53 G12 G15 G17 (search for similar items in EconPapers)
Pages: 39
Date: 2010-09-02
New Economics Papers: this item is included in nep-bec and nep-for
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://repec.econ.au.dk/repec/creates/rp/10/rp10_58.pdf (application/pdf)

Related works:
Journal Article: A comprehensive look at financial volatility prediction by economic variables (2012)
Working Paper: A Comprehensive Look at Financial Volatility Prediction by Economic Variables (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2010-58

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