Portfolio and Security Analysis Commons^™

Evaluating Volatility Forecasts In Various Equity Market Regimes, John P. Felletter

Doctoral Dissertations (DBA)

Forecasting volatility is a critical component of asset allocation, risk management, and option pricing. Many different methods and models are used to predict volatility, and many studies have examined the efficacy of one method or another. This study investigates whether the abilities of historical volatility, GARCH models, and VIX to forecast volatility vary in different market conditions, as distinguished by levels of volatility and returns. It is found that market conditions do impact the abilities of the variables to forecast volatility. Overall, the forecasts implied by the GARCH models perform best according to the various metrics, while the VIX forecast …