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Forecasting VIX with Stock and Oil Prices

Author

Listed:
  • Hung-Hsi Huang

    (Department of Banking and Finance, National Chiayi University, Taiwan)

  • Yi-Ru Lin

    (Department of Banking and Finance, National Chiayi University, Taiwan)

Abstract

Using daily observations from 2004 to 2020, we find that separately, both stocks and oil price variables improve the prediction of the VIX, but not together. In particular, the oil price seems to be more informative. We study the sensitivity of our results with respect to different estimations setups; specifically we change the discounting factor in the EWLS (exponentially weighted least squares) estimation that seems to be relevant, but changing the size of the estimation window does not lead to unambiguous results. Finally, the numerical results show that the provided VIX forecasting models can help the investors to evaluate the volatility-related exchange traded products.

Suggested Citation

  • Hung-Hsi Huang & Yi-Ru Lin, 2023. "Forecasting VIX with Stock and Oil Prices," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 73(1), pages 24-55, January.
    • Handle: RePEc:fau:fauart:v:73:y:2023:i:1:p:24-55
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1512
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    Citations

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    Cited by:

    1. Dai, Zhifeng & Zhang, Xiaotong & Liang, Chao, 2024. "Efficient predictability of oil price: The role of VIX-based panic index shadow line difference," Energy Economics, Elsevier, vol. 129(C).

    More about this item

    Keywords

    VIX; volatility Index; forecast performance; stock price; oil price;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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