Forecasting VIX: The illusion of forecast evaluation criteria

Stavros Degiannakis and Eleftheria Kafousaki

No 322, Working Papers from Bank of Greece

Abstract: The paper uses daily realized volatility measures in order to gain forecast accuracy over stocks’ market implied volatility, as proxied by VIX Index, for forecast horizon of 1, 5, 10 and 22 days ahead. We evaluate forecast accuracy by incorporating a traditional statistical loss function, along with an objective-based evaluation criterion, that is the cumulative returns earned from the different HAR-type volatility models, through a simple yet effective trading exercise on VIX futures. Findings, illustrate how illusive the choice between the two metrics may be, as it ends in two contradicting results.

Keywords: Implied volatility forecasting; realized volatility measures; objective-based evaluation criteria (search for similar items in EconPapers)
JEL-codes: C32 C53 G15 (search for similar items in EconPapers)
Pages: 19
Date: 2023-06
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Citations: View citations in EconPapers (1)

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Journal Article: Forecasting VIX: the illusion of forecast evaluation criteria (2023)
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