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JEL - June 2003

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Journal of Economic Literature

Vol. 41, No. 2, June 2003

Forecasting Volatility in Financial Markets: A Review Ser-Huang Poon and Clive W.J. Granger
Article Citation
Poon, Ser-Huang, and Clive W.J. Granger. 2003. "Forecasting Volatility in Financial Markets: A Review ." Journal of Economic Literature, 41(2): 478–539.
DOI:10.1257/002205103765762743
Abstract
Financial market volatility is an important input for investment, option pricing, and financial market regulation. The emphasis of this review article is on forecasting instead of modelling; it compares the volatility forecasting findings in 93 papers published and written in the last two decades. Provided in this paper as well are volatility definitions, insights into problematic issues of forecast evaluation, data frequency, extreme values and the measurement of "actual" volatility. We compare volatility forecasting performance of two main approaches; historical volatility models and volatility implied from options. Forecasting results are compared across different asset classes and geographical regions.

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Authors

Poon, Ser-Huang
Granger, Clive W.J.

© 2012 AEA. The American Economic Association is hosted by Vanderbilt University.