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Measuring Historical Volatility


Louis H. Ederington


University of Oklahoma - Division of Finance

Wei Guan


University of South Florida St. Petersburg

Journal of Applied Finance, Vol. 16, No. 1, Spring/Summer 2006

Abstract:     
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, G13

Accepted Paper Series


Date posted: August 24, 2006  

Suggested Citation

Ederington, Louis H. and Guan, Wei, Measuring Historical Volatility. Journal of Applied Finance, Vol. 16, No. 1, Spring/Summer 2006. Available at SSRN: http://ssrn.com/abstract=926167

Contact Information

Louis H. Ederington (Contact Author)
University of Oklahoma - Division of Finance ( email )
Norman, OK 73019
United States
405-325-5591 (Phone)
405-325-7688 (Fax)
Wei Guan
University of South Florida St. Petersburg ( email )
College of Business
140 Seventh Avenue South
St. Petersburg, FL 33701-5016
United States
(727) 873-4945 (Phone)
(727) 873-4192 (Fax)
Feedback to SSRN (Beta)


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References:  12
Citations:  1

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