Finance Research Group Working Papers, Department of Business Studies, Aarhus School of Business, University of Aarhus
The Forecast Performance of Competing Implied Volatility Measures: The Case of Individual Stocks
Abstract: This study examines the information content of alternative
implied volatility measures for the 30 components of the Dow Jones
Industrial Average Index from 1996 until 2007. Along with the popular
Black-Scholes and "model-free" implied volatility expectations, the
recently proposed corridor implied volatility (CIV) measures are explored.
For all pair-wise comparisons, it is found that a CIV measure that is
closely related to the model-free implied volatility, nearly always
delivers the most accurate forecasts for the majority of the firms. This
finding remains consistent for different forecast horizons, volatility
definitions, loss functions and forecast evaluation settings.
Keywords: No keywords; (follow links to similar papers)
37 pages, March 19, 2009
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