A Comparison of Index and Equity Volatility Using Range-Based Estimators

with Alan Chow and Gwendolyn Pennywell, the Journal of Business and Economic Perspectives, Volume XLV (1), Spring/Summer, 2018, 10-22


We use the Pitman Closeness Criteria to compare four range-based volatility models. We utilize the daily high-low-open-close data for the S&P 500, DJIA, and NASDAQ indices, which are readily available, instead of a commonly used, yet more difficult to obtain, high frequency data to calculate the volatility of the daily returns. We then use the 30 equities of the DKIA to make similar comparisons of estimator performance. In both cases of the comparison of estimator for indices and equities, the better performing estimator is dependent on the method of measurement of variance, as well as the method of performance comparison.

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