Post by Sapphire Capital on Sept 5, 2008 3:33:33 GMT 4
Are VIX Futures Prices Preditable? An Empirical Investigation
Eirini Konstantinidi
University of Piraeus
George S. Skiadopoulos
University of Piraeus; Warwick Business School - Financial Options Research Centre
July 24, 2008
Abstract:
This paper investigates whether volatility futures prices per se can be forecasted by studying the fast growing VIX futures market. To this end, alternative model specifications are employed. Point and interval out-of sample forecasts are constructed and evaluated under various statistical metrics. Next, the economic significance of the obtained forecasts is also assessed by performing trading strategies. Only weak evidence of statistically predictable patterns in the evolution of volatility futures prices is found. No trading strategy yields economically significant profits. Hence, the hypothesis that the VIX volatility futures market is informationally efficient cannot be rejected.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1174102_code83248.pdf?abstractid=1174102&mirid=1
Eirini Konstantinidi
University of Piraeus
George S. Skiadopoulos
University of Piraeus; Warwick Business School - Financial Options Research Centre
July 24, 2008
Abstract:
This paper investigates whether volatility futures prices per se can be forecasted by studying the fast growing VIX futures market. To this end, alternative model specifications are employed. Point and interval out-of sample forecasts are constructed and evaluated under various statistical metrics. Next, the economic significance of the obtained forecasts is also assessed by performing trading strategies. Only weak evidence of statistically predictable patterns in the evolution of volatility futures prices is found. No trading strategy yields economically significant profits. Hence, the hypothesis that the VIX volatility futures market is informationally efficient cannot be rejected.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1174102_code83248.pdf?abstractid=1174102&mirid=1