Measuring Historical Volatility
Louis H. Ederington
University of Oklahoma - Division of Finance
University of South Florida St. Petersburg
Journal of Applied Finance, Vol. 16, No. 1, Spring/Summer 2006
The adjusted mean absolute deviation is proposed as a simple-to-calculate alternative to the historical standard deviation as a measure of historical volatility and an input to option pricing models. We show that this measure forecasts future volatility consistently better than the historical standard deviation across a wide variety of markets. Moreover, it forecasts as well as or better than the GARCH(1,1) model.
Number of Pages in PDF File: 10
JEL Classification: C53, G13Accepted Paper Series
Date posted: August 24, 2006
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo2 in 0.391 seconds