I am looking for a simple formula (easy to code in TC2007 for example) that could help me rank stocks based on the expected volatility. What are good predictors of the next day volatility? According to this http://www.cs.sunysb.edu/~finance/longo/ previous day(s) volatility is a good predictor. So, I should be able to use a crude formula like this: Vol_expected=Vol_yesterday*x+Vol_2days_ago*y+Vol_3days_ago*z . Where do I get estimates for x,y,z parameters? Are there better formulas?
Simple formula to predict stock volatility
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sooooooo you want me to help you make money, and as I recall we are competing for same prices you and me
oh I got it, I will give you false information
darn it maybe not, you are too smart for that, I will give you REAL info and you will think its wrong info
now wait a minute, I don't have to give you anything, now do I
I better call my pastor to clear what I should do
oh I got it, I will give you false information
darn it maybe not, you are too smart for that, I will give you REAL info and you will think its wrong info
now wait a minute, I don't have to give you anything, now do I
I better call my pastor to clear what I should do
This should help get you started:
I think i found what i need. Yang Zhang volatility predictor:
http://www.sitmo.com/eq/417
http://www.sitmo.com/eq/417
If you could accurately predict volatility, you could profit off of it in the options market. However, the options market can tell you through using Algebra what volatility is priced into the stock, which may or may not be accurate, but will at least let you know what "the market" thinks.
Look up the different variations on GARCH models. The basic idea is that there is a long run volatility and current vol decays towards long term vol. You use a regression to get the parameters. I think you could do this in excel.