EconPapers    
Economics at your fingertips  
 

A Comprehensive Look at Financial Volatility Prediction by Economic Variables

Charlotte Christiansen, Maik Schmeling and Andreas Schrimpf

No 374, BIS Working Papers from Bank for International Settlements

Abstract: We investigate if asset return volatility is predictable by macroeconomic and financial variables and shed light on the economic drivers of financial volatility. Our approach is distinct due to its comprehensiveness: First, we employ a data-rich forecast methodology to handle a large set of potential predictors in a Bayesian Model Averaging approach, and, second, we take a look at multiple asset classes (equities, foreign exchange, bonds, and commodities) over long time spans. We find that proxies for credit risk and funding (il)liquidity consistently show up as common predictors of volatility across asset classes. Variables capturing time-varying risk premia also perform well as predictors of volatility. While forecasts by macro-finance augmented models also achieve forecasting gains out-of-sample relative to autoregressive benchmarks, the performance varies across asset classes and over time.

Keywords: Realised volatility; Forecasting; Data-rich modeling; Bayesian model averaging; Model uncertainty (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-for
Date: 2012-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (50) Track citations by RSS feed

Downloads: (external link)
http://www.bis.org/publ/work374.pdf Full PDF document (application/pdf)
http://www.bis.org/publ/work374.htm (text/html)

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 (2010) Downloads
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:bis:biswps:374

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Christian Beslmeisl ().

 
Page updated 2019-04-19
Handle: RePEc:bis:biswps:374