RT Journal Article SR Electronic T1 Using Fundamental Earnings Factors to Forecast Equity Market Volatility JF The Journal of Trading FD Institutional Investor Journals SP 14 OP 19 DO 10.3905/jot.2018.13.4.014 VO 13 IS 4 A1 Haim A. Mozes A1 John Launny Steffens YR 2018 UL https://pm-research.com/content/13/4/14.abstract AB This article introduces a model for forecasting future volatility using fundamental factors, including the extent to which the market’s valuation deviates from its predicted value, the losses reported by companies with negative earnings, projected earnings growth rates, and Treasury bill rates. The main result is that fundamental factors provide significant incremental explanatory power for predicting volatility relative to that provided by past volatility realizations alone. The explanatory power of fundamental factors is greatest when the VIX Index is at moderate rather than extreme levels so there is no expectation of long-term mean reversion for volatility. In addition, the explanatory power of fundamental factors is greatest when the model forecasts an increase in VIX. The overall conclusion of this study is that forecasts of future volatility should incorporate fundamental factors.TOPICS: Analysis of individual factors/risk premia, statistical methods