Forecasting Stock Market Volatility

by Dr. Michael Stamos, CFA

Volatility as a measure of investment risk enjoys ubiquitous presence in the academic world as well as in the financial industry and is often used as one input to manage trillions of dollars. In fact, the global allocation of investment capital may greatly benefit if researchers and analysts achieve a better understanding of the volatility forecasting problem.

In a recently published article in the February 2023 issue of The Journal of Portfolio Management, our Head of Global R&D Multi Asset, Dr. Michael Stamos, CFA, compares prominent volatility models in a joint notational framework that allows to understand analytically differences and commonalities between different academic and industry-standard models. Michael Stamos concludes with an empirical study that focuses on forecasting accuracy revealing that complexity does not necessarily add value.

Forecasting Stock Market Volatility cover