Fear Factor : Does the VIXC Provide the Most Accurate Forecast of Canadian Stock Market Volatility?

This study provides the first examination of the Canadian implied volatility indexes for forecasting future volatility. Introduced by Montreal exchange in 2010, the model-free implied volatility index for the Canadian stock market, the VIXC, outperforms the previously used model-based index, the MVX, for forecasting future volatility. The VIXC also provides more accurate forecasts for the 1-day horizon than the estimators based on historical data. However, for the 5- and 10-trading day horizons, historical volatility provides the most accurate forecasts. For the 22-trading day horizon, EWMA forecasts are the most accurate