The information content of Chinese volatility index for volatility forecasting

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)365-372
Journal / PublicationApplied Economics Letters
Volume28
Issue number5
Online published20 Apr 2020
Publication statusPublished - Mar 2021

Abstract

In this paper, we investigate whether the model-free implied volatility index iVX officially launched by the Shanghai Stock Exchange has incremental explanatory power for future volatility in the SSE 50 ETF. In particular, we concentrate on Heterogeneous Autoregressive model of realized volatility and iVX (HAR-RV-iVX). We use both in-sample and out-of-sample predictive regressions to empirically indicate that the iVX significantly improves the forecasting performance of the realized volatility of SSE 50 ETF.

Research Area(s)

  • Chinese volatility index, realized volatility, SSE 50 ETF, Volatility forecasting