We use intraday and daily data to examine the impact of cross-sectional return dispersion on volatility forecasting in the Chinese equity market. We adopt the GARCH, GJR-GARCH, and HAR models and, by augmenting them with return dispersion measures, provide empirical evidence that the return dispersion exhibits substantial information in describing the volatility dynamics by generating significantly lower forecasting errors at market and industry levels. Furthermore, the information content of the return dispersion tends to offer economic gain to a mean-variance utility investor. The findings are robust with respect to alternative volatility proxies, subsample analysis, and alternative market-wide stock indices.
|Journal||Pacific Basin Finance Journal|
|Publication status||Published - Dec 2019|
- Chinese CSI index
- Financial markets
- Industry effect
ASJC Scopus subject areas
- Economics and Econometrics