Forecasting Daily Variability of the S and P 100 Stock Index using Historical, Realised and Implied Volatility Measurements

The increasing availability of financial market data at intraday frequencies has not only led to the development of improved volatility measurements but has also inspired research into their potential value as an information source for volatility forecasting. In this paper we explore the forecasting value of historical volatility (extracted from daily return series), of implied volatility (extracted from option pricing data) and of realised volatility (computed as the sum of squared high frequency returns within a day). First we consider unobserved components and long memory models for realised volatility which is regarded as an accurate estimator of volatility. The predictive abilities of realised volatility models are compared with those of stochastic volatility models and generalised autoregressive conditional heteroskedasticity models for daily return series. These historical volatility models are extended to include realised and implied volatility measures as explanatory variables for volatility. The main focus is on forecasting the daily variability of the Standard and Poor's 100 stock index series for which trading data (tick by tick) of almost seven years is analysed. The forecast assessment is based on the hypothesis of whether a forecast model is outperformed by alternative models. In particular, we will use superior predictive ability tests to investigate the relative forecast performances of some models. Since volatilities are not observed, realised volatility is taken as a proxy for actual volatility and is used for computing the forecast error. A stationary bootstrap procedure is required for computing the test statistic and its $p$-value. The empirical results show convincingly that realised volatility models produce far more accurate volatility forecasts compared to models based on daily returns. Long memory models seem to provide the most accurate forecasts

Exploring the Fundamental Dynamics of Error-Based Motor Learning Using a Stationary Predictive-Saccade Task

The maintenance of movement accuracy uses prior performance errors to correct future motor plans; this motor-learning process ensures that movements remain quick and accurate. The control of predictive saccades, in which anticipatory movements are made to future targets before visual stimulus information becomes available, serves as an ideal paradigm to analyze how the motor system utilizes prior errors to drive movements to a desired goal. Predictive saccades constitute a stationary process (the mean and to a rough approximation the variability of the data do not vary over time, unlike a typical motor adaptation paradigm). This enables us to study inter-trial correlations, both on a trial-by-trial basis and across long blocks of trials. Saccade errors are found to be corrected on a trial-by-trial basis in a direction-specific manner (the next saccade made in the same direction will reflect a correction for errors made on the current saccade). Additionally, there is evidence for a second, modulating process that exhibits long memory. That is, performance information, as measured via inter-trial correlations, is strongly retained across a large number of saccades (about 100 trials). Together, this evidence indicates that the dynamics of motor learning exhibit complexities that must be carefully considered, as they cannot be fully described with current state-space (ARMA) modeling efforts

Dynamic linkages between stock markets : the effects of crises and globalization

This paper investigates changes in the dynamics of linkages between selected national stock markets during the period 1995–2009. The analysis focuses on the possible effects of globalization and differences between crisis and non-crisis periods. We model the dynamics of dependencies between the series of daily returns on selected stock indices over different time periods, and compare strength of the linkages. Our tools are dynamic copula models and a formal sequential testing procedure based on the model confidence set methodology. We consider two types of dependencies: regular dependence measured by means of the conditional Spearman’s rho, and dependencies in extremes quantified by the conditional tail dependence coefficients. The main result consists of a collection of rankings created for the considered subperiods, which show how the mean level of strength of the dependencies have been changing in time. The rankings obtained for Spearman’s rho and tail dependencies differ, which allows us to distinguish between the results of crises and the effect of globalization.info:eu-repo/semantics/publishedVersio