Bandi, Federico M.; Perron, Benoit - In: Journal of Financial Econometrics 4 (2006) 4, pp. 636-670
We argue that the predictive regression between implied volatility (regressor) and realized volatility over the remaining life of a European option (regressand) is likely to be a fractional cointegrating relation. Because cointegration is associated with long-run comovements, this classical...