IPD Securities Forecasts
Effective signals for the onset of major spikes in volatility
IPD Forcasting Securities Volatility
The chart shows IPD H/L forecasts applied to predicting monthly volatility* for the Hang Seng – a highly volatile Hong Kong stock market index shown with the green line in the chart.
IPD H/L forecasts are mapped onto monthly volatility (blue line) using statistical regression. All forecasts (red line) are out-of-sample.
*calculated as the sum of squared daily returns
Practitioners know exponential smoothing and related methods are incapable of tracking spikes such as seen with Hang Seng volatility.
IPD H/L forecasts provide a more reliable basis for predicting volatility than exponential smoothing, GARCH, and ARCH models.