Efficient predictability of stock return volatility: The role of stock market implied volatility

Abstract This study examines the predictability of stock market implied volatility on stock volatility in five developed economies (the US, Japan, Germany, France, and the UK) using monthly volatility data for the period 2000 to 2017. We utilize a simple linear autoregressive model to capture predictive relationships between stock market implied volatility and stock volatility. Our in-sample results show there exists very significant Granger causality from stock market implied volatility to stock volatility. The out-of-sample results also indicate that stock market implied volatility is significantly more powerful for stock volatility than the oil price volatility in five developed economies.

• Publication year

  2020

• Venue

  The North American Journal of Economics and Finance

• Publication date

  2020-04-01

• Fields of study

  Economics

• Identifiers
  DOI 10.1016/j.najef.2020.101174
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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