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Forecasting exchange rate volatility: a multiple horizon comparison using historical, realized and implied volatility measures

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  • David T. L. Siu

    (Department of Accounting & Finance, Monash University, Melbourne, Australia)

  • John Okunev

    (Global Alpha Portfolio Management Pty Ltd)

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    Abstract

    Recent studies suggest realized volatility provides forecasts that are as good as option-implied volatilities, with improvement stemming from the use of high-frequency data instead of a long-memory specification. This paper examines whether volatility persistence can be captured by a longer dataset consisting of over 15 years of intra-day data. Volatility forecasts are evaluated using four exchange rates (AUD|USD, EUR|USD, GBP|USD, USD|JPY) over horizons ranging from 1 day to 3 months, using an expanded set of short-range and long-range dependence models. The empirical results provide additional evidence that significant incremental information is found in historical forecasts, beyond the implied volatility information for all forecast horizons. Copyright © 2008 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/for.1090
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

    Volume (Year): 28 (2009)
    Issue (Month): 6 ()
    Pages: 465-486

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    Handle: RePEc:jof:jforec:v:28:y:2009:i:6:p:465-486

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966

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