Predicting the volatility of German stocks: theory and empirical evidence
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| Format: | Thesis Book |
| Language: | English |
| Published: |
2000
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| Subjects: | |
| Online Access: | Inhaltsverzeichnis |
| Physical Description: | 177 S. graph. Darst. |
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MARC
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| 100 | 1 | |a Oberhansberg, Utz Richard |e Verfasser |4 aut | |
| 245 | 1 | 0 | |a Predicting the volatility of German stocks |b theory and empirical evidence |c vorgelegt von Utz Richard Oberhansberg |
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| adam_text | Table of Contents
I. Introduction 1
1.1 Objectives of this paper 1
1.2 The concept of market efficiency 2
1.2.1 Introduction 2
1.2.2 The dynamic understanding of market efficiency 3
1.2.3 General overview of the evaluation methodologies employed in
empirical research on market efficiency 3
1.2.4 Conclusion 5
1.3 Efficiency in option markets 5
1.3.1 Introduction 5
1.3.2 The interdependence between volatility forecasts and option values... 6
/. 3.3 The determinants of market efficiency in option markets 8
1.3.4 Brief survey of existing empirical knowledge on the efficiency of
option markets 9
1.3.5 Conclusion 15
1.4 Objectives of the study 16
1.4.1 Introduction 16
1.4.2 Test objective 16
1.4.3 Test idea 17
1.4.4 Test strategy 18
1.4.5 Conclusion 20
1.5 Organization of the paper 21
II. Theoretical framework for empirically testing the efficiency of option
markets 23
II. 1 Introduction 23
11.2 Option valuation models 24
11.2.1 Introduction 24
11.2.2 Black Scholes model 25
11.2.3 Jump valuation models 30
11.2.4 Stochastic volatility models 34
11.2.5 Conclusion 41
11.3 The adequacy of the modeling of return processes in valuation models. 43
11.31 Introduction 43
11.3.2 The consequences of the non linear dependence structure of asset
returns on option pricing 45
11.3.3 The incorporation of return induced information in volatility
forecasts exemplified by ARCH models 48
11.3.4 Analysis of the adequacy of the treatment of the autocorrelation
structure of asset returns in valuation models 52
11.3.5 Conclusion 57
11.4 Derivation of a test strategy for assessing market efficiency through
the incorporation of return induced information 58
11.4.1 Test objective 58
11.4.2 Evaluation methodologies employed for empirically testing the
market s ability of forecasting return volatility 59
11.4.3 Indications of results of previous empirical research on the design
of the test strategy 64
11.4.4 Conclusion 71
11.5 Return process of option investment 72
11.5.1 Introduction 72
11.5.2 Risk factors of option investment 72
11.5.3 Return process on delta neutral hedge portfolios 73
11.5.4 Return process under the proposed evaluation strategy 74
II. 5.5.Conclusion 76
11.6 Summary of evaluation strategy to be employed 77
III. Empirical results 79
III. 1 Introduction 79
111.2 Analysis of the stock price data employed 80
111.2.1 Introduction 80
111.2.2 Data employed. 80
///. 2.3 Distributional characteristics of asset returns 81
111.2.4 Day of the week effect in German equity returns 87
111.2.5 Autocorrelation structure of asset returns 89
III.2.6GARCH volatility forecasts 91
111.2.7 Conclusion 98
111.3 Analysis of the option price data employed 99
III. 3.1 Introduction 99
111.3.2 Institutional features of the German option market 99
111.3.3 Data requirements for the empirical tests 102
111.3.4 Option price data employed 104
///. 3.5 Time series characteristics of implied volatility 107
111.3.6 Day of the week effect in implied volatility 110
III. 3.7 Autocorrelations in changes of volatility forecasts 113
111.3.8 Conclusion 113
111.4 Results from trading profit based evaluation 114
111.4.1 Introduction 114
111.4.2 Test strategy 115
111.4.3 Empirical results obtained by selectively taking option positions
on predictions of short term volatility 118
111.4.4 Risk characteristics of returns generated. 122
111.4.5 Decomposition of results obtained 127
111.4.6 Conclusion 133
111.5 Conclusion 134
IV. Appraisal of the evidential content of results obtained 135
IV.l Introduction 135
IV.2 Evidence provided on the market s information incorporation
process 136
IV.2.1 General considerations 136
IV. 2.2 Indications on the adequacy of the incorporation of return
induced information in results of other studies 136
IV.2.3 Tests on the market s processing of non return induced
information 139
IV.2.4 Conclusion 142
IV.3 The impact of the employed evaluation strategy on the validity of
reported results 143
IV.3.1 Introduction 144
IV. 3.2 Consequences of the use of a simulated option market 149
IV.3.3 Transaction costs 152
IV.3.4 Conclusion 152
IV.4 Conclusions 152
V. References 158
Figures
Figure III.l ALV: Stock price history 82
Figure III.2 VOW: Stock price history 83
Figure III.3 ALV: Subsequent estimates of 21 day rolling
volatilities 84
Figure III.4 VOW: Subsequent estimates of 21 day rolling
volatilities 84
Figure III.5 ALV: GARCH(1,1) volatility forecasts 97
Figure III.6 VOW: GARCH( 1,1) volatility forecasts 97
Figure III.7 Smile structure in ALV options expiring in March 1999 on
16.03.1999, price of the underlying security 301,2 106
Figure III.8 Smile structure in VOW options expiring in March 1999 on
16.03.1999, price of the underlying security 57,3 106
Figure III.9 ALV: Trade volume weighted implied volatility measure as derived
from traded call options over the period beginning 19.02.91 and
ending 10.06.94 108
Figure III. 10 VOW: Trade volume weighted implied volatility measure as derived
from traded call options over the period beginning 19.02.91 and
ending 10.06.94 108
Figure III.l 1 ALV: Accumulated returns from selectively investing in delta
neutral straddles on the indications of the employed evaluation
strategies over the evaluation period 120
Figure III. 12 VOW: Accumulated returns from selectively investing in delta
neutral straddles on the indications of the employed evaluation
strategies over the evaluation period 122
Figure IV. 1 ALV: Theoretical trading profits from trading on the recommen¬
dations of implied volatility in options priced at GARCH
volatilities 141
Figure IV.2 VOW: Theoretical trading profits from trading on the recommen¬
dations of implied volatility in options priced at GARCH
volatilities 142
Figure IV.3 ALV: Profits from strangle trading (101C 99P) with short sale
restriction 146
Figure IV.4 VOW: Profits from strangle trading (101C 99P) with short sale
restriction 147
Tables
Table III.l Summary results of the time series characteristics of all stocks in
the sample 86
Table III.2 Day of the week effect in daily return data in return and
volatility 88
Table III.3 ALV: Autocorrelations (AC) and partial autocorrelations
(PAC) in returns, squared returns and absolute returns 90
Table III.4 VOW: Autocorrelations (AC) and partial autocorrelations
(PAC) in returns, squared returns and absolute returns 90
Table III.5 Results of the GARCH(1,1) parameter estimation 94
Table III.6 Cross sectional results of the GARCH(1,1) parameter
estimation 95
Table III.7 Monthly turnover statistics for stocks in November 1994 and
for DTB equity options in April 1994 100
Table III.8 Summary of the time series characteristics of competing volatility
forecasts over the evaluation period beginning February 19, 1991
and ending June 10, 1994 109
Table III.9 Day of the week effect in implied volatility 112
Table III. 10 Summary results of the employed trading strategies over the
analyzed time horizon beginning 19.02.91 and ending 10.06.94 ..126
|
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| id | DE-604.BV013207133 |
| illustrated | Illustrated |
| indexdate | 2024-07-09T18:40:48Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-008997894 |
| oclc_num | 247494001 |
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| physical | 177 S. graph. Darst. |
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| spelling | Oberhansberg, Utz Richard Verfasser aut Predicting the volatility of German stocks theory and empirical evidence vorgelegt von Utz Richard Oberhansberg 2000 177 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier St. Gallen, Univ., Diss., 1999 Deutsche Terminbörse (DE-588)4212755-5 gnd rswk-swf Börsenkurs / Volatilität / Prognoseverfahren / Deutschland Aktienkursprognose (DE-588)4122774-8 gnd rswk-swf Markteffizienz (DE-588)4125819-8 gnd rswk-swf Aktienoption (DE-588)4120856-0 gnd rswk-swf (DE-588)4113937-9 Hochschulschrift gnd-content Deutsche Terminbörse (DE-588)4212755-5 b Aktienoption (DE-588)4120856-0 s Markteffizienz (DE-588)4125819-8 s Aktienkursprognose (DE-588)4122774-8 s DE-604 HBZ Datenaustausch application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=008997894&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Oberhansberg, Utz Richard Predicting the volatility of German stocks theory and empirical evidence Deutsche Terminbörse (DE-588)4212755-5 gnd Börsenkurs / Volatilität / Prognoseverfahren / Deutschland Aktienkursprognose (DE-588)4122774-8 gnd Markteffizienz (DE-588)4125819-8 gnd Aktienoption (DE-588)4120856-0 gnd |
| subject_GND | (DE-588)4212755-5 (DE-588)4122774-8 (DE-588)4125819-8 (DE-588)4120856-0 (DE-588)4113937-9 |
| title | Predicting the volatility of German stocks theory and empirical evidence |
| title_auth | Predicting the volatility of German stocks theory and empirical evidence |
| title_exact_search | Predicting the volatility of German stocks theory and empirical evidence |
| title_full | Predicting the volatility of German stocks theory and empirical evidence vorgelegt von Utz Richard Oberhansberg |
| title_fullStr | Predicting the volatility of German stocks theory and empirical evidence vorgelegt von Utz Richard Oberhansberg |
| title_full_unstemmed | Predicting the volatility of German stocks theory and empirical evidence vorgelegt von Utz Richard Oberhansberg |
| title_short | Predicting the volatility of German stocks |
| title_sort | predicting the volatility of german stocks theory and empirical evidence |
| title_sub | theory and empirical evidence |
| topic | Deutsche Terminbörse (DE-588)4212755-5 gnd Börsenkurs / Volatilität / Prognoseverfahren / Deutschland Aktienkursprognose (DE-588)4122774-8 gnd Markteffizienz (DE-588)4125819-8 gnd Aktienoption (DE-588)4120856-0 gnd |
| topic_facet | Deutsche Terminbörse Börsenkurs / Volatilität / Prognoseverfahren / Deutschland Aktienkursprognose Markteffizienz Aktienoption Hochschulschrift |
| url | http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=008997894&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA |
| work_keys_str_mv | AT oberhansbergutzrichard predictingthevolatilityofgermanstockstheoryandempiricalevidence |