Research Repository

An International Comparison of Implied, Realized, and GARCH Volatility Forecasts

Kourtis, Apostolos and Markellos, Raphael N and Symeonidis, Lazaros (2016) 'An International Comparison of Implied, Realized, and GARCH Volatility Forecasts.' Journal of Futures Markets, 36 (12). 1164 - 1193. ISSN 0270-7314

[img]
Preview
Text
An International Comparison of Implied, Realized and GARCH Volatility Forecasts.pdf - Accepted Version

Download (2MB) | Preview

Abstract

We compare the predictive ability and economic value of implied, realized, and GARCH volatility models for 13 equity indices from 10 countries. Model ranking is similar across countries, but varies with the forecast horizon. At the daily horizon, the Heterogeneous Autoregressive model offers the most accurate predictions, whereas an implied volatility model that corrects for the volatility risk premium is superior at the monthly horizon. Widely used GARCH models have inferior performance in almost all cases considered. All methods perform significantly worse over the 2008–09 crisis period. Finally, implied volatility offers significant improvements against historical methods for international portfolio diversification.

Item Type: Article
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 28 Jan 2020 13:23
Last Modified: 28 Jan 2020 14:15
URI: http://repository.essex.ac.uk/id/eprint/26581

Actions (login required)

View Item View Item