I just wanted to share with you the results from my next generation S&P500 Volatility Model. This model seeks to predict, on a weekly basis, the direction of the S&P500’s Historical Volatility. I optimize the model weekly and then make a one week forward prediction on a rolling time series window.
To test how robust the model is, I took a sample from the training data to see if the model would be able to match the actual trend. As I said previously, this volatility model has a predictive accuracy between 60 to 70%, in this case its 65%.
I highly doubt that I’d be able to do better than 70% in predicting volatility, because of its “volatile nature,” but as a future option trader I’m willing to live with it. :)
S&P500 Volatility Prediction Results
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