Volatility forecasting under the political uncertainty of the second Trump presidency

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216224%3A14560%2F25%3A00142628" target="_blank" >RIV/00216224:14560/25:00142628 - isvavai.cz</a>

Výsledek na webu

<a href="https://www.sciencedirect.com/science/article/pii/S1544612325020082" target="_blank" >https://www.sciencedirect.com/science/article/pii/S1544612325020082</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1016/j.frl.2025.108754" target="_blank" >10.1016/j.frl.2025.108754</a>

Jazyk výsledku

angličtina

Název v původním jazyce

Volatility forecasting under the political uncertainty of the second Trump presidency

Popis výsledku v původním jazyce

This study examines the growing importance of the variance risk premium (VRP) in forecasting realized volatility during periods of heightened uncertainty. We propose a structured framework for the formal evaluation of the VIX1D index. Furthermore, using SPY data around the 2024 U.S. presidential election and Trump's inauguration, we provide evidence that augmenting HAR models with option-implied VRP, tailored to specific forecasting horizons, significantly improves both in-sample fit and out-of-sample forecast accuracy. The results remain robust in the benchmarking procedure against models enhanced by VIX9D, VIX, and short-term uncertainty proxies. The implied economic value of forward-looking risk measures in environments with increased uncertainty is complemented by utility-based evaluation that demonstrates welfare gains even in the presence of transaction costs. Our findings underscore the critical role of the option-derived information and substantiate its academic and practical relevance in uncertain settings.

Název v anglickém jazyce

Volatility forecasting under the political uncertainty of the second Trump presidency

Popis výsledku anglicky

This study examines the growing importance of the variance risk premium (VRP) in forecasting realized volatility during periods of heightened uncertainty. We propose a structured framework for the formal evaluation of the VIX1D index. Furthermore, using SPY data around the 2024 U.S. presidential election and Trump's inauguration, we provide evidence that augmenting HAR models with option-implied VRP, tailored to specific forecasting horizons, significantly improves both in-sample fit and out-of-sample forecast accuracy. The results remain robust in the benchmarking procedure against models enhanced by VIX9D, VIX, and short-term uncertainty proxies. The implied economic value of forward-looking risk measures in environments with increased uncertainty is complemented by utility-based evaluation that demonstrates welfare gains even in the presence of transaction costs. Our findings underscore the critical role of the option-derived information and substantiate its academic and practical relevance in uncertain settings.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

50200 - Economics and Business

Projekt

<a href="/cs/project/GF25-14398L" target="_blank" >GF25-14398L: Variance Risk Premium: Využití krátkodobých opcí, průřezové analýzy a řídících faktorů</a><br>

Návaznosti

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)<br>S - Specificky vyzkum na vysokych skolach

Rok uplatnění

2025

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

Finance Research Letters

ISSN

1544-6123

e-ISSN

1544-6131

Svazek periodika

86

Číslo periodika v rámci svazku

December

Stát vydavatele periodika

US - Spojené státy americké

Počet stran výsledku

15

Strana od-do

1-15

Kód UT WoS článku

001612892600001

EID výsledku v databázi Scopus

2-s2.0-105022823311