Forecasting Implied Volatility Evolution Fails to Yield Profitable Trading Strategies
The article investigates if implied volatility can be predicted by analyzing European and U.S. volatility indices. Different models are used to make forecasts, and the results are tested using trading strategies in volatility futures markets. The study finds that while there are predictable patterns in implied volatility evolution, these patterns do not lead to consistent profits. Therefore, it suggests that volatility futures markets are efficient and cannot be exploited for abnormal gains.