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A forecasting analysis of risk‐neutral equity and Treasury volatilities
Author(s) -
GonzálezUrteaga Ana,
Nieto Belén,
Rubio Gonzalo
Publication year - 2019
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/for.2591
Subject(s) - treasury , economics , equity (law) , econometrics , stock (firearms) , excess return , financial economics , equity risk , volatility (finance) , finance , geography , context (archaeology) , private equity , archaeology , political science , law
This paper employs equity (VIX) and Treasury (MOVE) risk‐neutral volatilities to assess their relative forecasting performance with respect to future real activity, stock and Treasury excess returns, and aggregate risk factors. The in‐sample evidence suggests that the square of VIX tends to dominate the square of MOVE. Out‐of‐sample predictive analysis, performed as a horse race between equity and Treasury risk‐neutral volatilities, shows that, contrary to earlier results, the square of VIX and MOVE tend to complement each other.