The Economic Value of Volatility Timing using a Range-Based Volatility Model
31 Pages Posted: 22 Jan 2009
Date Written: October 6, 2008
Abstract
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 is used to examine the economic value of volatility timing in a mean-variance framework. We compare 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 is shown that the predictable ability captured by the dynamic volatility models is economically significant, and that the range-based volatility model performs better than the return-based one.
Keywords: Asset allocation, CARR, DCC, Economic value, Range, Volatility timing
JEL Classification: C5, C52, G11
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Measuring and Testing the Impact of News on Volatility
By Robert F. Engle and Victor K. Ng
-
Caviar: Conditional Value at Risk by Quantile Regression
By Simone Manganelli and Robert F. Engle
-
Dynamic Conditional Correlation - a Simple Class of Multivariate GARCH Models
-
Dynamic Conditional Correlation a Simple Class of Multivariate GARCH Models
-
Dynamic Conditional Correlation - a Simple Class of Multivariate GARCH Models
-
Dynamic Conditional Correlation : A Simple Class of Multivariate GARCH Models
-
Asset Pricing with a Factor Arch Covariance Structure: Empirical Estimates for Treasury Bills
By Robert F. Engle, Victor Ng, ...
-
Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH
By Kevin Sheppard and Robert F. Engle
-
Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH
By Robert F. Engle and Kevin Sheppard
-
Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH
By Robert F. Engle and Kevin Sheppard