Are combination forecasts of S&P 500 volatility statistically superior?

Ralf Becker and Adam Clements

No 17, NCER Working Paper Series from National Centre for Econometric Research

Abstract: Forecasting volatility has received a great deal of research attention. Many articles have considered the relative performance of econometric model based and option implied volatility forecasts. While many studies have found that implied volatility is the preferred approach, a number of issues remain unresolved. One issue being the relative merit of combination forecasts. By utilising recent econometric advances, this paper considers whether combination forecasts of S&P 500 volatility are statistically superior to a wide range of model based forecasts and implied volatility. It is found that combination forecasts are the dominant approach, indicating that the VIX cannot simply be viewed as a combination of various model based forecasts.

Keywords: Implied volatility; volatility forecasts; volatility models; realized volatility; combination forecasts. (search for similar items in EconPapers)
JEL-codes: C12 C22 G00 (search for similar items in EconPapers)
Pages: 28
Date: 2007-06-14
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Journal Article: Are combination forecasts of S&P 500 volatility statistically superior? (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:qut:auncer:2007-92

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