Forecasting VIX

Stavros Degiannakis

    Research output: Contribution to journalArticlepeer-review


    Implied volatility index of the S&P500 is considered as a dependent variable in a fractionally integrated ARMA model, whereas volatility measures based on interday and intraday datasets are considered as explanatory variables. The next trading day’s implied volatility forecasts provide positive average daily profits. All the forecasting information is provided by the VIX index itself. There is no incremental predictability from both realized volatility computed from intraday data and conditional volatility extracted from an Arch model. Hence, neither the interday volatility nor the use of intraday data yield any added value in forecasting the S&P500 implied volatility index. However, an agent cannot utilize VIX predictions in creating abnormal returns in implied volatility futures market.
    Original languageEnglish
    Pages (from-to)5-19
    Number of pages15
    JournalJournal of Money, Investment and Banking
    Issue number4
    Publication statusPublished - 2008


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