Forecasting Stock Index Volatility: The Incremental Information in the Intraday High-Low Price Range

Charles Corrado and Cameron Truong
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Cameron Truong: University of Auckland

No 127, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: We compare the incremental information content of implied volatility and intraday high-low range volatility in the context of conditional volatilityforecasts for three major market indexes: the S&P 100, the S&P 500, and the Nasdaq 100. Evidence obtained from out-of-sample volatility forecasts indicates that neither implied volatility nor intraday high-low range volatility subsumes entirely the incremental information contained in the other. Our findings suggest that intraday high-low range volatility can usefully augment conditional volatility forecasts for these market indexes.

Pages: 34 pages
Date: 2004-06-01
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