1. Department of Economics, School of Social Sciences, University of Manchester, Manchester M13 9PL, United Kingdom;2. School of Economics and Finance, Queensland University of Technology, GPO Box 2434, Brisbane, Qld 4001, Australia
Abstract:
This paper contributes to our understanding of the informational content of implied volatility. Here we examine whether the S&P 500 implied volatility index (VIX) contains any information relevant to future volatility beyond that available from model based volatility forecasts. It is argued that this approach differs from the traditional forecast encompassing approach used in earlier studies. The findings indicate that the VIX index does not contain any such additional information relevant for forecasting volatility.