Predicting Realized Variance Out of Sample: Can Anything Beat The Benchmark?
Fuente:
arXiv
Salvato in:
| Autore principale: | |
|---|---|
| Natura: | Preprint |
| Pubblicazione: |
2025
|
| Soggetti: | |
| Accesso online: | |
| Tags: |
Aggiungi Tag
Nessun Tag, puoi essere il primo ad aggiungerne!!
|
| _version_ | 1866915333886967808 |
|---|---|
| author | Pollok, Austin |
| author_facet | Pollok, Austin |
| contents | The discrepancy between realized volatility and the market's view of volatility has been known to predict individual equity options at the monthly horizon. It is not clear how this predictability depends on a forecast's ability to predict firm-level volatility. We consider this phenomenon at the daily frequency using high-dimensional machine learning models, as well as low-dimensional factor models. We find that marginal improvements to standard forecast error measurements can lead to economically significant gains in portfolio performance. This makes a case for re-imagining the way we train models that are used to construct portfolios. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2506_07928 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Predicting Realized Variance Out of Sample: Can Anything Beat The Benchmark? Pollok, Austin Statistical Finance The discrepancy between realized volatility and the market's view of volatility has been known to predict individual equity options at the monthly horizon. It is not clear how this predictability depends on a forecast's ability to predict firm-level volatility. We consider this phenomenon at the daily frequency using high-dimensional machine learning models, as well as low-dimensional factor models. We find that marginal improvements to standard forecast error measurements can lead to economically significant gains in portfolio performance. This makes a case for re-imagining the way we train models that are used to construct portfolios. |
| title | Predicting Realized Variance Out of Sample: Can Anything Beat The Benchmark? |
| topic | Statistical Finance |
| url | https://arxiv.org/abs/2506.07928 |