Trade Versus Time Series Based Volatility Forecasts: Evidence from the Austrian Stock Market
Financial Markets and Portfolio Management, Vol. 15, No. 4, 2001
Posted: 6 Sep 2005
Abstract
This paper compares the quality of commonly used predictors for the volatility of stock returns. The techniques studied are moving averages of squared returns, GARCH and stochastic volatility models, and the implied volatility. We use a variety of econometric criteria to assess the forecasting performance. Among the models we estimate, no clear winner emerges. The implied volatility is found to contain information, which is absent in time series, based forecasts. Based on our findings we suggest practical consequences for the purpose of derivatives valuation and risk management.
JEL Classification: G0, G1
Suggested Citation: Suggested Citation