Forecasting stock index volatility

DOI10.1002/ASMB.423MaRDI QIDQ2722284zbMATH OpenOpenAlexFDO

Authors Riccardo Bramante, Santamaria Luigi

Publication date 11 July 2001

Published in Applied Stochastic Models in Business and Industry (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1002/asmb.423

zbMATH Keywords

ARCH modelsdownside riskvolatility forecasting

Mathematics Subject Classification ID

Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Applications of statistics to actuarial sciences and financial mathematics (62P05) Microeconomic theory (price theory and economic markets) (91B24) Economic time series analysis (91B84)

Review text

Volatility modelling has been a very active area of research in recent years, mainly when referred to financial markets. Volatility measures are in fact crucial in many financial areas such as risk management and asset pricing. This paper is concerned with how to construct stock index volatility predictors using the returns histories of the stocks that define the index. The results reported in this paper suggest that different volatility measures, one applied to down and another to up movements in prices, provide useful information concerning volatility estimates of prices over time. Furthermore, it is found that the volatility of a stock index can be explained by the one of its related components and that different stocks explain downside and upside volatility of the index. The Italian Stock Index MIB30, along the 30-blue-chip stocks on which it is calculated, provide the time-series returns to test the model.

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Cites work

• ARCH models and financial applications
• Generalized autoregressive conditional heteroscedasticity

Cited in

(11)

• The impact of information timeliness on the predictability of stock and futures returns: An application of vector models
• Predicting index returns with morphological filters
• Stock index return forecasting: the information of the constituents
• Speed of price adjustment in Indian stock market: a paradox
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• Evaluating Volatility and Correlation Forecasts
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• Forecasting stock market volatility in Central and Eastern European countries
• The Predictive Power of the French Market Volatility Index: A Multi Horizons Study *
• Volatility Forecasts and Value at Risk Evaluation for the MSCI North America Index
• Are volatility indices in international stock markets forward looking?

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