This paper investigates the relation between aggregate investment and oil volatility and its permanent and transitory components for a developing country, Malaysia. In the paper, the components generalized autoregressive conditional heteroskedasticity (CGARCH) model is utilized to decompose conditional oil volatility into permanent oil volatility and transitory oil volatility. Respectively refl...

This paper examines the ability of GARCH(1,1) and GARCH(1,1) + Implied Volatility models to forecast stock market volatility on the FTSE100 index. Comparing the volatility forecasts with the implied volatility of the corresponding at-the-money index option contract, it is investigated whether successful volatility trading models can be developed. An at-the-money index call was bought/sold if th...

Volatility is a widely recognized measure of market risk. As volatility is not observed it has to be estimated from market prices, i.e., as the implied volatility from option prices. The volatility index VIX making volatility a tradeable asset in its own right is computed from nearand next-term put and call options on the S&P 500 with more than 23 days and less than 37 days to expiration and no...

Volatility is an integral and inescapable variable of financial engineering, modeling, and finance theory itself Classical financial economics proxies volatility for risk itself, as it becomes difficult to predict future price realizations of a given asset when that asset exhibits significant price volatility over a given time. However, the nature of volatility as it is explained by classical f...

Due to the fast delivery of news articles by news providers on the Internet and/or via news datafeeds, it becomes an important research issue of predicting the risk of stocks by utilizing such textual information available in addition to the time series information. In the literature, the issue of predicting stock price up/down trend based on news articles has been studied. In this paper, we st...

In this paper we examine the effect of stochastic volatility on optimal portfolio choice in both partial and general equilibrium settings. In a partial equilibrium setting we derive an analog of the classic Samuelson–Merton optimal portfolio result and define volatility-adjusted risk aversion as the effective risk aversion of an individual investing in an asset with stochastic volatility. We ex...

This paper proposes a class of nonlinear stochastic volatility models. The proposed class encompasses many parametric stochastic volatility models that have appeared in the literature, including the well known lognormal stochastic volatility model. The new class is based on the Box-Cox transformation and offers an alternative to the one introduced in Andersen (1994). An advantage of our propose...

An understanding of volatility in stock markets is important for determining the cost of capital and for assessing investment and leverage decisions as volatility is synonymous with risk. Substantial changes in volatility of financial markets are capable of having significant negative effects on risk averse investors. Using daily returns from 1992 to 2002, we investigate volatility co-movement ...

a r t i c l e i n f o This paper assesses the long-run effect of growth volatility on income inequality using a comprehensive panel of annual U.S. state-level data during the 1945 to 2004 period. Using the pooled mean group (PMG) estimator, we find evidence supporting the hypothesis that larger growth volatility positively and significantly associates with higher income inequality. Our key find...