Forecasting Volatility States and Active Portfolio Strategies
21 Pages Posted: 21 Mar 2002
Abstract
In this paper, we analyze the value of predicting index returns as well as volatility. On the basis of a three state regime-switching model we produce genuine out-of-sample forecasts for the volatility of the S&P 500. Using monthly data from 1900 to 1999, we test the statistical significance of return and volatility timing for mean-variance investors. We find strong evideince for market timing in both returns and volatility. Furthermore, adding the possibility of leverage do not add anything to the relationship between risk and return in the portfolios.
JEL Classification: G11, C15, C53, C61
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Modeling and Forecasting Realized Volatility
By Torben G. Andersen, Tim Bollerslev, ...
-
Modeling and Forecasting Realized Volatility
By Torben G. Andersen, Tim Bollerslev, ...
-
The Distribution of Realized Exchange Rate Volatility
By Torben G. Andersen, Tim Bollerslev, ...
-
The Distribution of Exchange Rate Volatility
By Torben G. Andersen, Tim Bollerslev, ...
-
The Distribution of Exchange Rate Volatility
By Torben G. Andersen, Tim Bollerslev, ...
-
The Distribution of Stock Return Volatility
By Torben G. Andersen, Tim Bollerslev, ...
-
By Torben G. Andersen, Tim Bollerslev, ...
-
Range-Based Estimation of Stochastic Volatility Models
By Sassan Alizadeh, Michael W. Brandt, ...
-
By Torben G. Andersen, Tim Bollerslev, ...
-
By Torben G. Andersen, Tim Bollerslev, ...