Misalignments and Aggregated Volatility

12 Pages Posted: 2 Mar 2007

See all articles by Christophe Boucher

Christophe Boucher

ESG

Bertrand B. Maillet

EMLyon Business School (Paris Campus)

Thierry Michel

Lombard Odier & Cie

Date Written: March 2007

Abstract

This paper considers forecasting regressions of "realized volatility" on a misalignment measure defined by the temporary deviations from the common trend between the earning-price ratio and current inflation. Results show that this misalignment measure is useful to predict stock market volatility at monthly horizons. The analysis also suggests a threshold effect where only misalignments exceeding a certain level of overvaluation have a positive and significant impact on future volatility.

Keywords: Realized Volatility, Volatility Forecasting, Asymmetry

JEL Classification: G12, C53

Suggested Citation

Boucher, Christophe and Maillet, Bertrand B. and Michel, Thierry, Misalignments and Aggregated Volatility (March 2007). Available at SSRN: https://ssrn.com/abstract=967385 or http://dx.doi.org/10.2139/ssrn.967385

Christophe Boucher

ESG ( email )

25 rue saint ambroise
Paris, 75011
France

Bertrand B. Maillet (Contact Author)

EMLyon Business School (Paris Campus) ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

Thierry Michel

Lombard Odier & Cie ( email )

11 rue de la Corraterie
Geneva, 1211
Switzerland

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