Simple formula to predict stock volatility

Discussion in 'Trading' started by shortie, Mar 21, 2008.

  1. I am looking for a simple formula (easy to code in TC2007 for example) that could help me rank stocks based on the expected volatility. What are good predictors of the next day volatility? According to this previous day(s) volatility is a good predictor. So, I should be able to use a crude formula like this: Vol_expected=Vol_yesterday*x+Vol_2days_ago*y+Vol_3days_ago*z . Where do I get estimates for x,y,z parameters? Are there better formulas?
  2. cold


    sooooooo you want me to help you make money, and as I recall we are competing for same prices you and me

    oh I got it, I will give you false information

    darn it maybe not, you are too smart for that, I will give you REAL info and you will think its wrong info

    now wait a minute, I don't have to give you anything, now do I

    I better call my pastor to clear what I should do
  3. This should help get you started:
  4. actually this formula is also not what i want. i need something similar that incorporates some sort of EMA instead of averaging volatilities without regard for the fact that most recent volatility is more relevant.
  5. If you could accurately predict volatility, you could profit off of it in the options market. However, the options market can tell you through using Algebra what volatility is priced into the stock, which may or may not be accurate, but will at least let you know what "the market" thinks.
  6. Look up the different variations on GARCH models. The basic idea is that there is a long run volatility and current vol decays towards long term vol. You use a regression to get the parameters. I think you could do this in excel.