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Practical Issues in Forecasting Volatility

Ser-Huang Poon and Clive Granger
Financial Analysts Journal
Vol. 61, No. 1 (Jan. - Feb., 2005), pp. 45-56
Published by: CFA Institute
Stable URL: http://www.jstor.org/stable/4480636
Page Count: 12
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Practical Issues in Forecasting Volatility
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Abstract

A comparison is presented of 93 studies that conducted tests of volatility-forecasting methods on a wide range of financial asset returns. The survey found that option-implied volatility provides more accurate forecasts than time-series models. Among the time-series models, no model is a clear winner, although a possible ranking is as follows: historical volatility, generalized autoregressive conditional heteroscedasticity, and stochastic volatility. The survey produced some practical suggestions for volatility forecasting.

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