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The Daily Closing VIX Data for 2008 Reveal Unrecognized PropertiesMaria T. Gonzalez-PerezUniversidad Complutense de Madrid - Colegio Universitario de Estudios Financieros (CUNEF) David E. GuerreroUniversidad Complutense de Madrid (UCM) - Colegio Universitario de Estudios Financieros (CUNEF) Arthur B. Treadwayaffiliation not provided to SSRN July 1, 2009 Abstract: Data analyses of daily closing VIX in 2008 reveal that: (1) the value of the lambda parameter, in the one-parameter Box and Cox (1964) family, appropriate for VIX, is around -.4 and is very far from one (no transformation) and zero (logarithm), the values typical of most of the literature, (2) the optimally transformed VIX follows an I(1) stochastic process, so that undifferenced VIX, transformed or not, does not have properties propitious for statistical analysis and (3) there are occasional large and unforecastable anomalous events in VIX data that, if ignored, can seriously distort any sort of statistical analysis. We achieve a linear, normal, homoskedastic representation of this data by transforming VIX in the B-C sense, modeling anomalous values explicitly and with a very simple IMA(1,1) model that is almost a random walk.
Number of Pages in PDF File: 26 Keywords: time series analysis, volatility index, forecasting JEL Classification: C32, G13, G15 working papers seriesDate posted: July 16, 2009Suggested CitationContact Information
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