The information content of implied volatility and jumps in forecasting volatility: Evidence from the Shanghai gold futures market

Xingguo LUO; Shihua QIN; Zinan YE

doi:10.1016/j.frl.2016.06.012

The information content of implied volatility and jumps in forecasting volatility: Evidence from the Shanghai gold futures market

Xingguo LUO^*
, Shihua QIN
, Zinan YE

^*Corresponding author for this work

Research output: Journal Publications › Journal Article (refereed) › peer-review

25 Citations (Scopus)

Abstract

This paper investigates the information content of the CBOE Gold ETF Volatility Index (GVZ) and jumps in forecasting realized volatility of the Shanghai gold futures market. We find strong in-sample evidence that the GVZ and jumps are significant and both greatly improve next day volatility forecasts. Also, these results are robust when the recent financial crisis is considered. Further, out-of-sample analysis confirms that the GVZ and jumps are important factors in forecasting future volatility. More important, we show that the GVZ outperforms jumps in terms of forecasting performance.

Original language	English
Pages (from-to)	105-111
Number of pages	7
Journal	Finance Research Letters
Volume	19
Early online date	21 Jun 2016
DOIs	https://doi.org/10.1016/j.frl.2016.06.012
Publication status	Published - Nov 2016
Externally published	Yes

Bibliographical note

Acknowledgment:
We would like to thank the Editor, Douglas Cumming and two anonymous referees for their very helpful comments and suggestions.

Publisher Copyright:
© 2016 Elsevier Inc.

Funding

The research reported in this paper was supported by the National Natural Science Foundation of China (project no. 71301143), the Natural Science Foundation of Zhejiang Province (project no. LQ13G030001), and the Academy of Financial Research, Zhejiang University and Zhejiang Province (project no. XK16001).

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 10 Reduced Inequalities

Keywords

Gold futures
Realized volatility
Volatility forecasting
Volatility Index

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10.1016/j.frl.2016.06.012

Cite this

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title = "The information content of implied volatility and jumps in forecasting volatility: Evidence from the Shanghai gold futures market",

abstract = "This paper investigates the information content of the CBOE Gold ETF Volatility Index (GVZ) and jumps in forecasting realized volatility of the Shanghai gold futures market. We find strong in-sample evidence that the GVZ and jumps are significant and both greatly improve next day volatility forecasts. Also, these results are robust when the recent financial crisis is considered. Further, out-of-sample analysis confirms that the GVZ and jumps are important factors in forecasting future volatility. More important, we show that the GVZ outperforms jumps in terms of forecasting performance.",

keywords = "Gold futures, Realized volatility, Volatility forecasting, Volatility Index",

author = "Xingguo LUO and Shihua QIN and Zinan YE",

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language = "English",

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T1 - The information content of implied volatility and jumps in forecasting volatility: Evidence from the Shanghai gold futures market

AU - LUO, Xingguo

AU - QIN, Shihua

AU - YE, Zinan

PY - 2016/11

Y1 - 2016/11

N2 - This paper investigates the information content of the CBOE Gold ETF Volatility Index (GVZ) and jumps in forecasting realized volatility of the Shanghai gold futures market. We find strong in-sample evidence that the GVZ and jumps are significant and both greatly improve next day volatility forecasts. Also, these results are robust when the recent financial crisis is considered. Further, out-of-sample analysis confirms that the GVZ and jumps are important factors in forecasting future volatility. More important, we show that the GVZ outperforms jumps in terms of forecasting performance.

AB - This paper investigates the information content of the CBOE Gold ETF Volatility Index (GVZ) and jumps in forecasting realized volatility of the Shanghai gold futures market. We find strong in-sample evidence that the GVZ and jumps are significant and both greatly improve next day volatility forecasts. Also, these results are robust when the recent financial crisis is considered. Further, out-of-sample analysis confirms that the GVZ and jumps are important factors in forecasting future volatility. More important, we show that the GVZ outperforms jumps in terms of forecasting performance.

KW - Gold futures

KW - Realized volatility

KW - Volatility forecasting

KW - Volatility Index

UR - https://www.scopus.com/pages/publications/84977481336

U2 - 10.1016/j.frl.2016.06.012

DO - 10.1016/j.frl.2016.06.012

M3 - Journal Article (refereed)

AN - SCOPUS:84977481336

SN - 1544-6123

VL - 19

SP - 105

EP - 111

JO - Finance Research Letters

JF - Finance Research Letters

ER -

The information content of implied volatility and jumps in forecasting volatility: Evidence from the Shanghai gold futures market

Abstract

Bibliographical note

Funding

UN SDGs

Keywords

Access to Document

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