The economic value of volatility timing using a range-based volatility model
AbstractThere is growing interest in utilizing the range data of asset prices to study the role of volatility in financial markets. In this paper, a new range-based volatility model was used to examine the economic value of volatility timing in a mean-variance framework. We compared its performance with a return-based dynamic volatility model in both in-sample and out-of-sample volatility timing strategies. For a risk-averse investor, it was shown that the predictable ability captured by the dynamic volatility models is economically significant, and that a range-based volatility model performs better than a return-based one.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 34 (2010)
Issue (Month): 11 (November)
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Web page: http://www.elsevier.com/locate/jedc
Asset allocation CARR DCC Economic value Range Volatility timing;
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