Yes...academics.
Volatility forecasting
- Thread starter Gambit
- Start date
You might be missing the point. It's an important part of the risk/reward ratio. It normalizes asset returns to make them comparable.
It is Volatility that gives the market it's importance. It's an energy field created by all living things. It surrounds us and penetrates us. It binds the galaxy together.
It is Volatility that gives the market it's importance. It's an energy field created by all living things. It surrounds us and penetrates us. It binds the galaxy together.
It's actually very interesting. I always thought that you can't forecast volatility. Thanks for sharing.
GARCH implemented in Excel. http://investexcel.net/garch-excel/
Thanks to everyone for sharing their thoughts.
Thanks to everyone for sharing their thoughts.
Euan Sinclair suggests to keep things simple:
http://blog.factorwave.com/volatility-forecasting-for-traders
http://blog.factorwave.com/volatility-forecasting-for-traders
That pretty much settles it for me but it is beneficial to hear different perspectives.
Trying to understand this made my head spin, so can some of you help me out? I want to start with two fundamental questions:
1. First up is the stochastic process. It is assumed that stock prices are random, and therefor follow a stochastic process, i.e., the next variable is random and one cannot predict what it is, only the probability of what it is can be determined.
First question is how random is stock price?
2. Is volatility also stochastic, i.e., random? If it is not, then perhaps it can be forecasted. If it is, then forecasting will not be very accurate.
I still cannot make sense of ARCH and GARCH, but I think they are based on the assumption that volatility is not random (clusters around in between quiet periods) so can be modeled.
Second question for you folks is: Is it random (around a mean for example) or not?
Once I understand the randomness of both, I will try to make sense of ARCH.....
Maybe I got it all wrong but thanks I appreciate the discussions.
1. First up is the stochastic process. It is assumed that stock prices are random, and therefor follow a stochastic process, i.e., the next variable is random and one cannot predict what it is, only the probability of what it is can be determined.
First question is how random is stock price?
2. Is volatility also stochastic, i.e., random? If it is not, then perhaps it can be forecasted. If it is, then forecasting will not be very accurate.
I still cannot make sense of ARCH and GARCH, but I think they are based on the assumption that volatility is not random (clusters around in between quiet periods) so can be modeled.
Second question for you folks is: Is it random (around a mean for example) or not?
Once I understand the randomness of both, I will try to make sense of ARCH.....
Maybe I got it all wrong but thanks I appreciate the discussions.