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The Predictive Power of Implied Volatility of Portfolio Return in Korean Stock Market

한국주식시장 내재변동성의 포트폴리오 수익률 예측능력에 관한 연구

  • Received : 2011.11.15
  • Accepted : 2011.12.13
  • Published : 2011.12.31

Abstract

Volatility Index is the index that represents future volatility of underlying asset implied in option price and expected value of market that measures the possibility of stock price's change expected by investors. The Korea Exchange announces a volatility Index, VKOSPI, since April, 13, 2009. This paper used daily data from January, 2002 through December, 2008 and tested power of Volatility index for future returns of portfolios sorted by size, book-to-market equity and beta. As a result, VKOSPI has the predictive power to future returns and then VKOSPI may be determinants of returns. Also if beta is included when sorting portfolio, the predictive power of VKOSPI is stronger for future portfolio returns.

Keywords

Volatility Index;VKOSPI;Portfolio Return

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