Implied Volatility Index for the Norwegian Equity Market

Forthcoming, International Review of Financial Analysis

26 Pages Posted: 2 Aug 2016

See all articles by Sebastian Bugge

Sebastian Bugge

Norwegian University of Science and Technology (NTNU)

Haakon Guttormsen

Norwegian University of Science and Technology (NTNU)

Peter Molnár

University of Stavanger

Martin Ringdal

Norwegian University of Science and Technology (NTNU)

Date Written: August 1, 2016

Abstract

We introduce and evaluate the NOVIX - an implied volatility index for the Norwegian equity index OBX. NOVIX is created according to the VIX methodology. We compare the NOVIX to the German VDAX-NEW and the U.S. VIX and find that NOVIX has similar properties as these two indices. We also evaluate the VIX, VDAX-NEW and NOVIX in terms of volatility forecasting. As a benchmark model we use a precise HAR model of Corsi (2009) based on high-frequency data. All three implied volatility indices significantly improve daily, weekly and monthly forecasts of volatility of their underlying equity indices. This improvement is largest for the VIX, followed by VDAX-NEW and NOVIX.

Keywords: Implied volatility, OBX index, VIX, volatility forecasting, leverage effect

JEL Classification: G10, G13, G14

Suggested Citation

Bugge, Sebastian and Guttormsen, Haakon and Molnár, Peter and Ringdal, Martin, Implied Volatility Index for the Norwegian Equity Market (August 1, 2016). Forthcoming, International Review of Financial Analysis , Available at SSRN: https://ssrn.com/abstract=2816799

Sebastian Bugge

Norwegian University of Science and Technology (NTNU) ( email )

Høgskoleringen
Trondheim NO-7491, 7491
Norway

Haakon Guttormsen

Norwegian University of Science and Technology (NTNU) ( email )

Høgskoleringen
Trondheim NO-7491, 7491
Norway

Peter Molnár (Contact Author)

University of Stavanger ( email )

UiS Business School
Stavanger, 4036
Norway

Martin Ringdal

Norwegian University of Science and Technology (NTNU) ( email )

Høgskoleringen
Trondheim NO-7491, 7491
Norway

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