IDEAS home Printed from https://ideas.repec.org/a/bla/jbfnac/v23y1996i1p125-143.html

Forecasting Volatility For Portfolio Selection

Author

Listed:
  • George A. Vasilellis
  • Nigel Meade

Abstract

The volatility of an asset is a primary input to the portfolio selection problem. Information about volatility is available from two sources, namely the share market and the option market. This paper examines the forecasting performance, over a three month investment horizon, of time series forecasts (from the share market) and option based implied volatilities. Three time series models, including GARCH, are used and twenty four implied volatility estimation models are employed. Using a data set of twelve UK companies, it is demonstrated that implied volatilities produce better individual forecasts than time series. However, more remarkably, forecasts combining implied volatilies and time series estimates significantly outperform both component forecasts.

Suggested Citation

  • George A. Vasilellis & Nigel Meade, 1996. "Forecasting Volatility For Portfolio Selection," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 23(1), pages 125-143, January.
    • Handle: RePEc:bla:jbfnac:v:23:y:1996:i:1:p:125-143
    DOI: 10.1111/j.1468-5957.1996.tb00407.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1468-5957.1996.tb00407.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1468-5957.1996.tb00407.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jbfnac:v:23:y:1996:i:1:p:125-143. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.