Economic gains of realized volatility in the Brazilian stock market
A model of realized variance-covariance is proposed using a portfolio with the most liquid stockassets of Ibovespa. The purpose is to evaluate the economic gains associated with following avolatility timing strategy based on the model’s conditional forecasts. Comparing with traditionalvolatility methods, we find that economic gains associated with realized measures perform wellwhen estimation risk is controlled and increase proportionally to the target return. Whenexpected returns are bootstrapped, however, performance fees are not significant, which is anindication that economic gains of realized volatility are offset by estimation risk.
Year of publication: |
2014-05
|
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Authors: | Garcia, Marcio ; Medeiros, Marcelo ; Santos, Francisco Eduardo de Luna e Almeida |
Institutions: | Departamento de Economia, Pontifícia Universidade Católica do Rio de Janeiro |
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