Forecasting Volatility in Financial Markets: A Review
Financial market volatility is an important input for investment, option pricing, and financial market regulation. The emphasis of this review article is on forecasting instead of modelling; it compares the volatility forecasting findings in 93 papers published and written in the last two decades. Provided in this paper as well are volatility definitions, insights into problematic issues of forecast evaluation, data frequency, extreme values and the measurement of "actual" volatility. We compare volatility forecasting performance of two main approaches; historical volatility models and volatility implied from options. Forecasting results are compared across different asset classes and geographical regions.
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Volume (Year): 41 (2003)
Issue (Month): 2 (June)
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bollerslev, Tim, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
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- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Beckers, Stan, 1981. "Standard deviations implied in option prices as predictors of future stock price variability," Journal of Banking & Finance, Elsevier, vol. 5(3), pages 363-381, September.
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- Akgiray, Vedat, 1989. "Conditional Heteroscedasticity in Time Series of Stock Returns: Evidence and Forecasts," The Journal of Business, University of Chicago Press, vol. 62(1), pages 55-80, January.
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- Andersen, Torben G & Bollerslev, Tim, 1998. "Answering the Skeptics: Yes, Standard Volatility Models Do Provide Accurate Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 885-905, November.
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- Tom Doan, . "RATS program to replicate Bollerslev-Mikkelson(1996) FIEGARCH models," Statistical Software Components RTZ00173, Boston College Department of Economics.
- Andersen, Torben G, 1996. " Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Volatility," Journal of Finance, American Finance Association, vol. 51(1), pages 169-204, March.
- Blair, Bevan J. & Poon, Ser-Huang & Taylor, Stephen J., 2001. "Forecasting S&P 100 volatility: the incremental information content of implied volatilities and high-frequency index returns," Journal of Econometrics, Elsevier, vol. 105(1), pages 5-26, November.
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- Brailsford, Timothy J. & Faff, Robert W., 1996. "An evaluation of volatility forecasting techniques," Journal of Banking & Finance, Elsevier, vol. 20(3), pages 419-438, April.
- Baillie, Richard T. & Bollerslev, Tim & Mikkelsen, Hans Ole, 1996.
"Fractionally integrated generalized autoregressive conditional heteroskedasticity,"
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Elsevier, vol. 74(1), pages 3-30, September.
- Tom Doan, . "RATS programs to replicate Baillie, Bollerslev, Mikkelson FIGARCH results," Statistical Software Components RTZ00009, Boston College Department of Economics.
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