Your browser doesn't support javascript.
Forecasting global stock market volatilities in an uncertain world
International Review of Financial Analysis ; 85, 2023.
Article in English | Web of Science | ID: covidwho-2179809
ABSTRACT
We investigate the predictive relationship between uncertainty and global stock market volatilities from a highfrequency perspective. We show that uncertainty contains information beyond fundamentals (volatility) and strongly affects stock market volatility. Using several crucial uncertainty measures (i.e., uncertainty and implied volatility indices), we prove that the CBOE volatility index (VIX) performs best in point (density) forecasting;the financial stress index (FSI) in directional forecasting. Furthermore, VIX's predictive power improved dramatically after the COVID-19 outbreak, and the VIX-based portfolio strategy enables mean-variance investors to achieve higher returns. There are two empirical properties of VIX (i) it helps reduce significantly forecast variance rather than bias;and (ii) its forecasts encompass other uncertainty forecasts well. Overall, we highlight the importance of considering uncertainty when exploring the expected stock market volatility.
Keywords

Full text: Available Collection: Databases of international organizations Database: Web of Science Language: English Journal: International Review of Financial Analysis Year: 2023 Document Type: Article

Similar

MEDLINE

...
LILACS

LIS


Full text: Available Collection: Databases of international organizations Database: Web of Science Language: English Journal: International Review of Financial Analysis Year: 2023 Document Type: Article