The economic value of volatility timing using realized volatility

• 成果类型: Article
• 署名作者: Fleming, J; Kirby, C; Ostdiek, B
• 署名单位: Rice University; University of Texas System; University of Texas Dallas
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(02)00259-3
• 发表日期: 2003
• 页码: 473-509
• 关键词: volatility timing; realized volatility; Portfolio optimization; Mean-variance analysis; rolling estimators

摘要

Recent work suggests that intradaily returns can be used to construct estimates of daily return volatility that are more precise than those constructed using daily returns. We measure the economic value of this realized volatility approach in the context of investment decisions. Our results indicate that the value of switching from daily to intradaily returns to estimate the conditional covariance matrix can be substantial. We estimate that a risk-averse investor would be willing to pay 50 to 200 basis points per year to capture the observed gains in portfolio performance. Moreover, these gains are robust to transaction costs, estimation risk regarding expected returns, and the performance measurement horizon. (C) 2002 Elsevier Science B.V. All rights reserved.