Volatility Forecasts: Do Volatility Estimators and Evaluation Methods Matter?

Journal of Futures Markets, Forthcoming

31 Pages Posted: 28 Aug 2013 Last revised: 17 Sep 2013

See all articles by I-Ming Jiang

I-Ming Jiang

Faculty of Finance, College of Management, Yuan Ze University

Jui-Cheng Hung

Chinese Culture University - Department of Banking and Finance

Chuan-San Wang

National Taiwan University - The Department and Graduate Institute of Accounting

Date Written: August 27, 2013

Abstract

This study investigates the volatility forecasting abilities of return-based and range-based estimators for two stock indices and two individual stocks in the U.S. stock market. The forecasting performances are evaluated by two robust statistical loss functions, and further by financial applications in risk management and option pricing. Consistent with previous studies, the range-based volatility forecasts outperform in terms of statistical evaluation, Value-at-Risk calculation, and option pricing. However, return-based volatility forecasts prove superior in the evaluation of market risk capital requirements.

Keywords: Range-based and return-based estimators, risk management, option pricing, market risk capital requirements

JEL Classification: C52, C53, G17

Suggested Citation

Jiang, I-Ming and Hung, Jui-Cheng and Wang, Chuan-San, Volatility Forecasts: Do Volatility Estimators and Evaluation Methods Matter? (August 27, 2013). Journal of Futures Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2316645

I-Ming Jiang (Contact Author)

Faculty of Finance, College of Management, Yuan Ze University ( email )

No. 135, Far-East Road,
Chung-Li, Taoyuan, 32003
Taiwan
886-3-4638800 ext. 3662 (Phone)
886-3-4633824 (Fax)

Jui-Cheng Hung

Chinese Culture University - Department of Banking and Finance ( email )

Yaipei, 111
Taiwan

HOME PAGE: http://crbbbf.pccu.edu.tw/files/15-1142-6868,c3832-1.php

Chuan-San Wang

National Taiwan University - The Department and Graduate Institute of Accounting ( email )

1 Sec. 4, Roosevelt Road
Taipei 106, 106
Taiwan
+886-2-33669782 (Phone)
+886-2-23638038 (Fax)

HOME PAGE: http://exp.management.ntu.edu.tw/zh-TW/Acc/teachers/147

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
103
Abstract Views
951
rank
352,408
PlumX Metrics