Stock market volatility: Identifying major drivers and the nature of their impact

Considering a wide range of potential risk drivers, we apply boosting to derive monthly volatility predictions for the equity market represented by S&P 500 index. Comparisons with commonly-used GARCH and EGARCH benchmark models show that our approach substantially improves out-of-sample volatility forecasts for short- and longer-run horizons. The results indicate that risk drivers affect future volatility in a nonlinear fashion.