An international comparison of implied, realized and GARCH volatility forecasts

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We compare the predictive ability and economic value of implied, realized, and GARCH volatility models for 13 equity indices from 10 countries. Model ranking is similar across countries, but varies with the forecast horizon. At the daily horizon, the Heterogeneous Autoregressive model offers the most accurate predictions, whereas an implied volatility model that corrects for the volatility risk premium is superior at the monthly horizon. Widely used GARCH models have inferior performance in almost all cases considered. All methods perform significantly worse over the 2008–09 crisis period. Finally, implied volatility offers significant improvements against historical methods for international portfolio diversification. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark
Original languageEnglish
Pages (from-to)1164–1193
Number of pages30
JournalJournal of Futures Markets
Issue number12
Early online date20 May 2016
Publication statusPublished - Dec 2016


  • Implied Volatility
  • Realized Volatility
  • Volatility Risk Premium
  • Financial Crisis
  • International Diversification

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