Stock market volatility and the information content of stock index options

doi:10.1016/0304-4076(92)90073-Z

Journal of Econometrics

Volume 52, Issues 1–2, April–May 1992, Pages 267-287

https://doi.org/10.1016/0304-4076(92)90073-Z Get rights and content

Abstract

Previous studies of the information content of the implied volatilities from the prices of call options have used a cross-sectional regression approach. This paper compares the information content of the implied volatilities from call options on the S&P 100 index to GARCH (Generalized Autoregressive Conditional Heteroscedasticity) and Exponential GARCH models of conditional volatility. By adding the implied volatility to GARCH and EGARCH models as an exogenous variable, the within-sample incremental information content of implied volatilities can be examined using a likelihood ratio test of several nested models for conditional volatility. The out-of-sample predictive content of these models is also examined by regressing ex post volatility on the implied volatilities and the forecasts from GARCH and EGARCH models.

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Stock market volatility and the information content of stock index options

Abstract

Journal of Banking and Finance

Journal of Econometrics

Journal of Financial Economics

Journal of Financial Economics

Journal of Financial Economics

Journal of Econometrics

Journal of Financial Economics

Journal of Econometrics

Journal of Econometrics

Journal of Financial Economics

Journal of Financial Economics

Conditional heteroscedasticity in time series of stock returns: Evidence and forecasts

Journal of Business

Studies of stock price volatility changes

The pricing of options and corporate liabilities

Journal of Political Economy

Quasi-maximum likelihood estimation of dynamic models with time-varying covariances

A capital asset pricing model with time-varying covariances

Journal of Political Economy