The Forecast Quality of Cboe Implied Volatility Indexes

Olin School of Business Working Paper No. 2003-08-004

33 Pages Posted: 16 Sep 2003

See all articles by Charles J. Corrado

Charles J. Corrado

Deakin University - School of Accounting, Economics & Finance

Thomas W. Miller

Mississippi State University - College of Business; Saint Louis University - Department of Finance

Date Written: June 2003

Abstract

We examine the forecast quality of Chicago Board Options Exchange (CBOE) implied volatility indexes based on the Standard and Poor's 100 and Nasdaq 100 stock indexes. We find that the forecast quality of CBOE implied volatilities for the S&P 100 (VIX) has significantly improved in recent years, and implied volatilities for the Nasdaq 100 (VXN) provide even higher quality forecasts of future realized volatility. CBOE implied volatilities appear to contain significant forecast errors in the period 1988-94, but we find no indication of significant forecast errors in the period 1995-2002.

Keywords: options, implied volatility, volatility forecasting

JEL Classification: C13, C22, C54, G13, G14

Suggested Citation

Corrado, Charles J. and Miller, Thomas William, The Forecast Quality of Cboe Implied Volatility Indexes (June 2003). Olin School of Business Working Paper No. 2003-08-004, Available at SSRN: https://ssrn.com/abstract=436300 or http://dx.doi.org/10.2139/ssrn.436300

Charles J. Corrado (Contact Author)

Deakin University - School of Accounting, Economics & Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia
61492446214 (Phone)

Thomas William Miller

Mississippi State University - College of Business ( email )

Mississippi State, MS 39762-0964
United States

Saint Louis University - Department of Finance ( email )

3674 Lindell Blvd
Saint Louis, MO 63108-3397
United States
314-977-3851 (Phone)
314-977-1479 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
841
Abstract Views
4,151
rank
33,860
PlumX Metrics