The Economic Value of Volatility Timing Using a Range-based Volatility Model
There is growing interest in utilizing the range data of asset prices to study the role of volatility in financial markets. In this paper, we use a new range-based volatility model to examine the economic value of volatility timing in a mean-variance framework with three assets – stock, bond and cash. We compare its performance with a return-based dynamic volatility model in both in-sample and out-of-sample volatility timing strategies. For a risk-averse investor, it is shown that the predictable ability captured by the dynamic volatility models is economically significant, and that the range-based volatility model performs better than the return-based one. The results give robust inferences for supporting the range-based volatility model in forecasting volatility.
Asset allocation CARR DCC Economic value Range Volatility timing
Ray Yeutien Chou Nathan Liu
Institute of Economics,Academia Sinica and National Chiao Tung University Institute of Finance,National Chiao Tung University
国际会议
大连
英文
1-28
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）