Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/77780
Authors: 
Gonzalez-Perez, Maria T.
Novales, Alfonso
Year of Publication: 
2011
Citation: 
[Journal:] SERIEs - Journal of the Spanish Economic Association [ISSN:] 1869-4195 [Publisher:] Springer [Place:] Heidelberg [Volume:] 2 [Year:] 2011 [Issue:] 2 [Pages:] 185-216
Abstract: 
A model-free methodology is used for the first time to estimate a daily volatility index (VIBEX-NEW) for the Spanish financial market.We use a public data set of daily option prices to compute this index and showthat daily changes in VIBEXNEW display a negative, tight contemporaneous relationship with IBEX daily returns, contrary to other common volatility indicators, as an implied volatility indicator or a GARCH(1,1) conditional volatility model. This relationship is approximately symmetric to the sign on VIBEX-NEW changes and asymmetric to the IBEX-35 returns sign, which make it clearly a suitable volatility index for the Spanish stock market. We also examine the relationship between current VIBEX-NEW and future IBEX-35 volatility. Our results suggest that VIBEX-NEW can be used to produce IBEX-35 volatility forecasts at least as good as historical and conditional volatility measures. A feasible volatility correction methodology is proposed to achieve it.
Subjects: 
model-based volatility index
model-free volatility index
risk
leverage effect
forecasting volatility
JEL: 
C53
G13
G15
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/2.0/
Document Type: 
Article

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