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Does implied volatility provide any information beyond that captured in model-based volatility forecasts?

Becker, Ralf, Clements, Adam E., & White, Scott I. (2007) Does implied volatility provide any information beyond that captured in model-based volatility forecasts? Journal of Banking & Finance, 31(8), pp. 2535-2549.

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Abstract

This paper contributes to our understanding of the informational content of implied volatility. Here we examine whether the S&P 500 implied volatility index (VIX) contains any information relevant to future volatility beyond that available from model based volatility forecasts. It is argued that this approach differs from the traditional forecast encompassing approach used in earlier studies. The findings indicate that the VIX index does not contain any such additional information relevant for forecasting volatility.

Impact and interest:

23 citations in Scopus
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22 citations in Web of Science®

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ID Code: 14812
Item Type: Journal Article
Keywords: Implied volatility, Information, Volatility forecasts, Volatility models, Realized volatility, Volatility risk premium
DOI: 10.1016/j.jbankfin.2006.11.013
ISSN: 0378-4266
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BANKING FINANCE AND INVESTMENT (150200) > Finance (150201)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BANKING FINANCE AND INVESTMENT (150200) > Financial Econometrics (150202)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2007 Elsevier
Copyright Statement: Reproduced in accordance with the copyright policy of the publisher.
Deposited On: 12 Sep 2008
Last Modified: 29 Feb 2012 23:33

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