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The information content of Chinese volatility index for volatility forecasting

Author

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  • Zhe Li
  • Wei-Guo Zhang
  • Yue Zhang

Abstract

In this paper, we investigate whether the model-free implied volatility index iVX officially launched by the Shanghai Stock Exchange has incremental explanatory power for future volatility in the SSE 50 ETF. In particular, we concentrate on Heterogeneous Autoregressive model of realized volatility and iVX (HAR-RV-iVX). We use both in-sample and out-of-sample predictive regressions to empirically indicate that the iVX significantly improves the forecasting performance of the realized volatility of SSE 50 ETF.

Suggested Citation

  • Zhe Li & Wei-Guo Zhang & Yue Zhang, 2021. "The information content of Chinese volatility index for volatility forecasting," Applied Economics Letters, Taylor & Francis Journals, vol. 28(5), pages 365-372, March.
    • Handle: RePEc:taf:apeclt:v:28:y:2021:i:5:p:365-372
    DOI: 10.1080/13504851.2020.1753876
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    Cited by:

    1. Ye, Wuyi & Xia, Wenjing & Wu, Bin & Chen, Pengzhan, 2022. "Using implied volatility jumps for realized volatility forecasting: Evidence from the Chinese market," International Review of Financial Analysis, Elsevier, vol. 83(C).
    2. Gong, Xue & Zhang, Weiguo & Wang, Junbo & Wang, Chao, 2022. "Investor sentiment and stock volatility: New evidence," International Review of Financial Analysis, Elsevier, vol. 80(C).

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