Working Papers

The WNE Working Papers series has been published by the Faculty of Economic Sciences at the University of Warsaw since 2008.

The WNE Working Papers series provides a fast, open channel for disseminating research conducted at the Faculty of Economic Sciences, University of Warsaw. The papers hosted here are working versions (pre-prints) and may evolve as authors refine their analyses, incorporate feedback, or progress through formal peer-review. What you read is the current version released by the authors, timestamped and assigned DOI/ISSN identifiers to ensure precise citation and version tracking. Copyright remains with the authors, who may, at any time, upload a revised file or add a note directing readers to a later, peer-reviewed publication.

The Working Papers series accepts articles by research employees of the Faculty and publications from conferences organised at the Faculty of Economic Sciences at the University of Warsaw. Articles should be original research papers which have not been previously published, on the subject of economics.

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Number of Results 5

WP(18/2024)454. Explaining and forecasting abnormal returns and volume by investor sentiment indicators

Authors: Lis Szymon, Ślepaczuk Robert, Sakowski Paweł
This study investigates the impact of investor sentiment on stock returns and trading volume, challenging the efficient market hypothesis. Using CRSP data from May 1998 to March 2022, methods like Fama-MacBeth and quantile regression were applied to …

WP454. Explaining and forecasting abnormal returns and volume by investor sentiment indicators

This study investigates the impact of investor sentiment on stock returns and trading volume, challenging the efficient market hypothesis. Using CRSP data from May 1998 to March 2022, methods like Fama-MacBeth and quantile regression were applied to analyze sentiment indicators such as the VIX, AAII Investor Sentiment Survey, Consumer Confidence, and Baker-Wurgler Index. The findings reveal that investor sentiment significantly influences stock returns and trading volume, especially during uncertain times. Sentiment also affects financial metrics like SMB, HML, RMW, and CMA uniquely. This research provides new insights and practical implications for investors and analysts, emphasizing the importance of considering sentiment in investment strategies to better anticipate market movements and manage risks.


Lis Szymon, Ślepaczuk Robert, Sakowski Paweł
market sentiment factor models stock returns EMH Fama-MacBeth model quantile regression Baker-Wurgler index VIX index

WP(13/2024)449. The Hybrid Forecast of S&P 500 Volatility ensembled from VIX, GARCH and LSTM models

Authors: Natalia Roszyk, Ślepaczuk Robert
Predicting the S&P 500 index's volatility is crucial for investors and financial analysts as it helps in assessing market risk and making informed investment decisions. Volatility represents the level of uncertainty or risk related to the siz…

WP449. The Hybrid Forecast of S&P 500 Volatility ensembled from VIX, GARCH and LSTM models

Predicting the S&P 500 index's volatility is crucial for investors and financial analysts as it helps in assessing market risk and making informed investment decisions. Volatility represents the level of uncertainty or risk related to the size of changes in a security's value, making it an essential indicator for financial planning. This study explores four methods to improve the accuracy of volatility forecasts for the S&P 500: the established GARCH model, known for capturing historical volatility patterns; an LSTM network that utilizes past volatility and log returns; a hybrid LSTM-GARCH model that combines the strengths of both approaches; and an advanced version of the hybrid model that also factors in the VIX index to gauge market sentiment. This analysis is based on a daily dataset that includes data for S&P 500 and VIX index, covering the period from January 3, 2000, to December 21, 2023. Through rigorous testing and comparison, we found that machine learning approaches, particularly the hybrid LSTM models, significantly outperform the traditional GARCH model. The inclusion of the VIX index in the hybrid model further enhances its forecasting ability by incorporating real-time market sentiment. The results of this study offer valuable insights for achieving more accurate volatility predictions, enabling better risk management and strategic investment decisions in the volatile environment of the S&P 500.


DOI: https://doi.org/10.33138/2957-0506.2024.13.449
Natalia Roszyk, Ślepaczuk Robert
volatility forecasting LSTM-GARCH S&P 500 index hybrid forecasting models VIX index machine learning financial time series analysis walk-forward process hyperparameters tuning deep learning recurrent neural networks

WP(10/2020)316. Investing in VIX futures based on rolling GARCH models forecasts

Authors: Bilyk Oleh, Sakowski Paweł, Ślepaczuk Robert
The aim of this work is to compare the performance of VIX futures trading strategies built across different GARCH model volatility forecasting techniques. Long and short signals for VIX futures are produced by comparing one-day ahead volatility forec…

WP316. Investing in VIX futures based on rolling GARCH models forecasts

The aim of this work is to compare the performance of VIX futures trading strategies built across different GARCH model volatility forecasting techniques. Long and short signals for VIX futures are produced by comparing one-day ahead volatility forecasts with current historical volatility. We found out that using the daily data over the seven-year period (2013-2019), strategy based on the fGARCH-TGARCH and GJR-GARCH specifications outperformed those of the GARCH and EGARCH models, and performed slightly below the "buy-and-hold" S&P 500 strategy. For the base GARCH(1,1) model, the training window size and the type gave stable results, whereas the performance across refit frequency, conditional distribution of returns, and historical volatility estimators varies significantly. Despite non-robustness of some investment strategies and some space for improvements, the presented strategies show their potential in competing with the equity and volatility benchmarks.


Bilyk Oleh, Sakowski Paweł, Ślepaczuk Robert
GARCH VIX index volatility futures rolling forecasting volatility investment strategies volatility exposure

WP(26/2014)143. Volatility as a new class of assets? The advantages of using volatility index futures in investment strategies

Authors: Jabłecki Juliusz, Kokoszczyński Ryszard, Sakowski Paweł, Ślepaczuk Robert, Wójcik Piotr
This paper investigates the changes in the investment portfolio performance after including VIX. We apply different models for optimal portfolio selection (Markowitz and Black-Litterman) assuming both the possibility of short sale and the lack of it.…

WP143. Volatility as a new class of assets? The advantages of using volatility index futures in investment strategies

This paper investigates the changes in the investment portfolio performance after including VIX. We apply different models for optimal portfolio selection (Markowitz and Black-Litterman) assuming both the possibility of short sale and the lack of it. We also use various assets, data frequencies, and investment horizons to get a comprehensive picture of our results? robustness. Investment strategies including VIX futures do not always deliver higher returns or higher Sharpe ratios for the period 2006-2013. Their performance is quite sensitive to changes in model parameters. However, including VIX significantly increases the returns in almost all cases during the recent financial crisis. This result clearly emphasizes potential gains of having such an asset in the portfolio in case of very high volatility in financial markets.


Jabłecki Juliusz, Kokoszczyński Ryszard, Sakowski Paweł, Ślepaczuk Robert, Wójcik Piotr
volatility VIX futures investment strategies optimal portfolio selection Markowitz model Black-Litterman model

WP(25/2014)142. Simple heuristics for pricing VIX options

Authors: Jabłecki Juliusz, Kokoszczyński Ryszard, Sakowski Paweł, Ślepaczuk Robert, Wójcik Piotr
The article presents a simple parameterization of the volatility surface for options on the S&P 500 volatility index, VIX. Specifically, we document the following features of VIX implied volatility: (i) VIX at-the-money (ATM) implied volatility c…

WP142. Simple heuristics for pricing VIX options

The article presents a simple parameterization of the volatility surface for options on the S&P 500 volatility index, VIX. Specifically, we document the following features of VIX implied volatility: (i) VIX at-the-money (ATM) implied volatility correlates strongly with the volatility skew in S&P 500 options; (ii) VIX ATM implied volatility declines exponentially with options' time to expiry; (iii) a SABR-type model can be used to model the smile observed in VIX options. These observations lead to simple heuristics for quoting prices (in terms of implied volatility) of VIX options with almost arbitrary strike and expiry, obtaining values that are reasonably close to market levels.


Jabłecki Juliusz, Kokoszczyński Ryszard, Sakowski Paweł, Ślepaczuk Robert, Wójcik Piotr
VIX VIX options implied volatility surface
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