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The economic value of volatility timing using a range-based volatility model

  • Chou, Ray Yeutien
  • Liu, Nathan

There is growing interest in utilizing the range data of asset prices to study the role of volatility in financial markets. In this paper, a new range-based volatility model was used to examine the economic value of volatility timing in a mean-variance framework. We compared its performance with a return-based dynamic volatility model in both in-sample and out-of-sample volatility timing strategies. For a risk-averse investor, it was shown that the predictable ability captured by the dynamic volatility models is economically significant, and that a range-based volatility model performs better than a return-based one.

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File URL: http://www.sciencedirect.com/science/article/B6V85-506J0FH-2/2/752f6c207cdf23a87f12e553e5af3759
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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 34 (2010)
Issue (Month): 11 (November)
Pages: 2288-2301

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Handle: RePEc:eee:dyncon:v:34:y:2010:i:11:p:2288-2301
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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