Volatility Expectations and Disagreement

48 Pages Posted: 24 Dec 2011 Last revised: 22 Apr 2020

See all articles by Ronald Huisman

Ronald Huisman

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Nico van der Sar

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Remco C. J. Zwinkels

Vrije Universiteit Amsterdam; Tinbergen Institute

Date Written: April 22, 2020

Abstract

This paper examines the use of survey-based measures in volatility forecasting. We argue that the dispersion of individual mean return forecasts bridges the gap between individual volatilities and aggregate volatility. We use data coming from a repeated survey to capture volatility and mean return expectations of investors, and to produce aggregate volatility forecasts. Our survey-based measures are consistent and quantitatively similar with forecasts based on GARCH and implied volatility models. This result is robust to both in-sample and out-of-sample comparisons and in response to news. As an implication, disagreement can be regarded as an integral part of risk.

Keywords: volatility forecasting, disagreement, survey data

JEL Classification: C42, C53, G12

Suggested Citation

Huisman, Ronald and van der Sar, Nico and Zwinkels, Remco C.J., Volatility Expectations and Disagreement (April 22, 2020). Available at SSRN: https://ssrn.com/abstract=1976229 or http://dx.doi.org/10.2139/ssrn.1976229

Ronald Huisman

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Nico Van der Sar

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Remco C.J. Zwinkels (Contact Author)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, NL-1081HV
Netherlands
+31 20 59 85220 (Phone)

HOME PAGE: http://research.vu.nl/en/persons/remco-zwinkels

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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