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The role of news-based implied volatility among US financial markets

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  • Su, Zhi
  • Fang, Tong
  • Yin, Libo

Abstract

We investigate the role of uncertainty measured by news-based implied volatility in anticipating US long-term market volatilities from a GARCH-MIDAS model. We find that news-based implied volatility performs well in predicting long-term aggregate market volatilities. A subsample analysis provides that the predictive power of news-based implied volatility is decreasing.

Suggested Citation

  • Su, Zhi & Fang, Tong & Yin, Libo, 2017. "The role of news-based implied volatility among US financial markets," Economics Letters, Elsevier, vol. 157(C), pages 24-27.
    • Handle: RePEc:eee:ecolet:v:157:y:2017:i:c:p:24-27
    DOI: 10.1016/j.econlet.2017.05.028
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    References listed on IDEAS

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    More about this item

    Keywords

    News-based implied volatility; Financial markets; Long-term volatility; Predictability;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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