Abstract
We analyze the information content in volatility indices of international stock markets regarding current and future market conditions. We find strong negative relationships between changes in volatility indices and current market returns, as well as Granger causality running in both directions. Unfortunately, these correlations cannot be exploited, at least using linear models, to successfully forecast future realized volatility or future returns over long time horizons. Forecasts of future realized volatility obtained from volatility indices are as good as those obtained from historical volatility, but not good enough to be used for risk management. Volatility indices seem to reflect much better current market’s sentiment than any sensible expectation about future market conditions.
Resumen
Analizamos el contenido informativo de los índices de volatilidad de mercados internacionales de renta variable, en relación con las condiciones de mercado actuales y futuras. Encontramos fuertes relaciones negativas entre cambios en los índices de volatilidad y las rentabilidades actuales del mercado, así como causalidad de Granger en ambas direcciones. Lamentablemente, estas correlaciones no pueden utilizarse, al menos utilizando modelos lineales, para predecir con éxito la volatilidad realizada o las rentabilidades futuras, sobre horizontes temporales amplios. Las predicciones de volatilidad realizada futura que se obtienen a partir de los índices de volatilidad son tan buenas como las calculadas a partir de volatilidad histórica, pero no suficientemente buenas para ser utilizadas en gestión de riesgos. Los índices de volatilidad parecen reflejar mejor el sentimiento actual del mercado que expectativas razonables sobre las condiciones de mercado futuras.
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González, M.T., Novales, A. Are volatility indices in international stock markets forward looking?. Rev. R. Acad. Cien. Serie A. Mat. 103, 339–352 (2009). https://doi.org/10.1007/BF03191911
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DOI: https://doi.org/10.1007/BF03191911