Reality check for volatility models

Asset allocation decisions and value at risk calculations rely strongly on volatility estimates. Volatility measures such as rolling window, EWMA, GARCH and stochastic volatility are used in practice. GARCH and EWMA type models that incorporate the dynamic structure of volatility and are capable of forecasting future behavior of risk should perform better than constant, rolling window volatility models. For the same asset the model that is the ‘best’ according to some criterion can change from period to period. We use the reality check test∗ to verify if one model out-performs others over a class of re-sampled time-series data. The test is based on re-sampling the data using stationary bootstrapping. For each re-sample we check the ‘best’ model according to two criteria and analyze the distribution of the performance statistics. We compare constant volatility, EWMA and GARCH models using a quadratic utility function and a risk management measurement as comparison criteria. No model consistently out-performs the benchmark.

Elections and stock market volatility: evidence in OECD countries and developing countries

Este trabalho estuda se existe impacto na volatilidade dos mercados de ações em torno das eleições nacionais nos países da OCDE e nos países em Desenvolvimento. Ao mesmo tempo, pretende, através de variáveis explicativas, descobrir os fatores responsáveis por esse impacto. Foi descoberta evidência que o impacto das eleições na volatilidade dos mercados de ações é maior nos países em Desenvolvimento. Enquanto as eleições antecipadas, a mudança na orientação política e o tamanho da população foram os factores que explicaram o aumento da volatilidade nos países da OCDE, o nível democrático, número de partidos da coligação governamental e a idade dos mercados foram os factores explicativos para os países em Desenvolvimento.

Options listing and the volatility of the underlying asset: a study on the derivative market function

Os mercados de derivativos são vistos com muita desconfiança por inúmeras pessoas. O trabalho analisa o efeito da introdução de opções sobre ações no mercado brasileiro buscando identificar uma outra justificativa para a existência destes mercados: a alteração no nível de risco dos ativos objetos destas opções. A evidência empírica encontrada neste mercado está de acordo com os resultados obtidos em outros mercados - a introdução de opções é benéfica para o investidor posto que reduz a volatilidade do ativo objeto. Existe também uma tênue indicação de que a volatilidade se torna mais estocástica com a introdução das opções.

Volatility of returns, variations in prices and volume traded: evidence from the main stocks in Brazil

We study the relationship between the volatility and the price of stocks and the impact that variables such as past volatility, financial gearing, interest rates, stock return and turnover have on the present volatility of these securities. The results show the persistent behavior of volatility and the relationship between interest rate and volatility. The results also showed that a reduction in stock prices are associated with an increase in volatility. Finally we found a greater trading volume tends to increase the volatility.

Speculative bubbles and contagion: analysis of volatility's clusters during the DotCom bubble based on the dynamic conditional correlation model

Reviewing the de nition and measurement of speculative bubbles in context of contagion, this paper analyses the DotCom bubble in American and European equity markets using the dynamic conditional correlation (DCC) model proposed by (Engle and Sheppard 2001) as on one hand as an econometrics explanation and on the other hand the behavioral nance as an psychological explanation. Contagion is de ned in this context as the statistical break in the computed DCCs as measured by the shifts in their means and medians. Even it is astonishing, that the contagion is lower during price bubbles, the main nding indicates the presence of contagion in the di¤erent indices among those two continents and proves the presence of structural changes during nancial crisis

Robust Bayesian analysis of heavy-tailed stochastic volatility models using scale mixtures of normal distributions

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)

Economic Survey of Latin America and the Caribbean 2007-2008: Macroeconomic policy and volatility

Includes bibliography

The globalization of financial volatility: challenges for emerging economies

Includes bibliography

Corporate risk management and exchange rate volatility in Latin America

Includes bibliography

Seeking growth under financial volatility

Includes bibliography

Crisis, volatility and fiscal policy in Latin America

Includes bibliography

Multilateral banking and development financing in a context of financial volatility

Includes bibliography

Macroeconomic volatility and social vulnerability in Brazil: the Cardoso government (1995-2002) and perspectives

Includes bibliography

Corporate risk management and exchange rate volatility in Latin America

Includes bibliography

Investment and financial volatility in Latin America

Includes bibliography