Download or read book The Variance Risk Premium Around the World written by Juan M. Londono and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Global Variance Risk Premium written by Katja Novak and published by . This book was released on 2017 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Up and Downside Variance Risk Premia in Global Equity Markets written by Matthias Held and published by . This book was released on 2014 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Variance Risk Premiums and the Forward Premium Puzzle written by Juan M. Londono and published by . This book was released on 2016 with total page 67 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide new empirical evidence that world currency and U.S. stock variance risk premiums have nonredundant and significant predictive power for the appreciation rates of twenty-two currencies with respect to the U.S. dollar, especially at the four-month and one-month horizons, respectively. The heterogeneous exposures of currencies to the currency variance risk premium are systematically rising along the line of inflation risk. We rationalize these findings in a consumption-based asset pricing model, with local consumption uncertainty and global inflation uncertainty characterized, respectively, by the stock and currency variance risk premiums.
Download or read book Essays on FX Variance Risk Premium Monetary Policy and Currency Returns written by Igor Pozdeev and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Variance risk premium is arguably one of the most important and robust risk premia documented in the academic finance. The first chapter of this thesis deals with variance risk on the FX market: therein, I recover risk-neutralized covariance matrices of currency returns and combine them with ex post realized covariance matrices to determine the sign of the premium, associate portfolios ranked from highest to lowest premium values with popular currency factors, study the determinants of the FX variance risk and its explore asset pricing properties. I find evidence for an overall negative FX variance risk premium, but also document existence of strategies with a significantly positive one. Among portfolios with the most negative premium estimates, the US dollar index and Carry trade familiarly emerge. I report that portfolios of negative spot return momentum and high recently realized variance exhibit more negative FX variance risk premium. As far as the asset pricing properties are concerned, the Carry trade variance risk dominates the US dollar variance risk as a priced factor, contributing to resolution of the differential pricing of "good and bad'' carry portfolios. The second chapter studies the dynamics of currency spot and excess returns before policy rate announcements of central banks in developed economies. Therein, Dmitry Borisenko and I show that currencies depreciate before target rate cuts and appreciate before rate hikes. What makes the finding surprising is the fact that the fixed income derivatives market allows to forecast monetary policy decisions accurately enough to make the above drift exploitable by investors: our baseline specification of the trading strategy constructed by going long and short currencies before predicted local rate hikes and cuts earns a significant average return which would be only marginally higher if the forecast quality were perfect. In the third chapter, Nikola Mirkov, Paul Söderl.
Download or read book Variance Risk Premium Components and International Stock Return Predictability written by Juan M. Londono and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Variance Risk Premiums in Emerging Markets written by Fang Qiao and published by . This book was released on 2019 with total page 83 pages. Available in PDF, EPUB and Kindle. Book excerpt: We construct variance risk premiums for the nine major emerging markets of Brazil, China, India, South Korea, Mexico, Poland, Russia, South Africa, and Taiwan from 2000 to 2017 using the sample-extension methodology in Lynch and Wachter (2013). Both the emerging market and developed market variance risk premiums can predict stock market returns. However, the former is more important for longer horizons (beyond four months), whereas the latter is more important for shorter horizons (within four months). The partial integration of emerging markets and global economic uncertainty exposure may explain these different predictability patterns.
Download or read book Essays on Volatility and Variance Risk Premium written by Xiaoman Su and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Global Variance Risk Premium and Forex Return Predictability written by Arash Aloosh and published by . This book was released on 2017 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: I use forward-looking information available in stock market volatility indices to predict forex returns. In particular, I find that equity variance risk premiums (VRPs) -- the difference between the risk-neutral and statistical expectations of market return variation -- predict forex returns at a one-month horizon, both in-sample and out-of-sample. Moreover, compared to the major currency carry predictors, global VRP has more predictive power for currency carry trade returns, bilateral forex returns, and excess equity return differentials. To formalize the link between equity VRPs and forex returns, I provide a long-run risk model with stochastic volatility and complete markets, where the expected forex returns are a function of consumption growth variances and equity VRPs.
Download or read book The Variance Risk Premium written by Junye Li and published by . This book was released on 2016 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the properties of the variance risk premium (VRP). We propose a flexible asset pricing model that captures co-jumps in prices and volatility, and self-exciting jump clustering. We estimate the model on equity returns and variance swap rates at different horizons. The total VRP is negative and has a downward-sloping term structure, while its jump component displays an upward-sloping term structure. The abrupt and persistent response of the short-term jump VRP to extreme events makes this specific premium a proxy for investors' fear of a market crash. Furthermore, the use of the VRP level and slope, and of its components, helps improve the short-run predictability of equity excess returns.
Download or read book The Variance Risk Premium in Equilibrium Models written by Geert Bekaert and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The equity variance risk premium is the expected compensation earned for selling variance risk in equity markets. The variance risk premium is positive and shows moderate persistence. High variance risk premiums coincide with the left tail of the consumption growth distribution shifting down. These facts, together with a positive, yet moderate, difference between the risk-neutral entropy and variance of the aggregate market return, refute the bulk of the extant consumption-based asset pricing models. We introduce a tractable habit model that does fit the data. In the model, the variance risk premium depends positively (negatively) on "bad" ("good") consumption growth uncertainty.
Download or read book Variance Risk Premium Demystified written by Grigory Vilkov and published by . This book was released on 2008 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the dynamics and cross-sectional properties of the variance risk premia embedded in options on stocks and indices, approximated by the synthetic variance swap returns. Several important stylized facts and contributions arise. First, variance risk premia for indices are systematically larger (more negative) than for individual securities. Second, there are systematic cross-sectional differences in the price of variance in individual stocks. Linking variance swaps to firm size/book-to-market, and stock turnover characteristics, an investor gains access to several lucrative long-short strategies with Sharpe Ratios around 2.85. Third, principal component analysis reveals at most one important factor driving both stock and variance swap returns, which corresponds to the traditional market factor. For the remainder of the dynamics, the stock and its variance processes are nearly linearly independent. Fourth, we find the leverage effect through analysis of the relationship between the variance risk premium and stock to variance correlation. The systematic (market factor) part of the leverage effect provides additional evidence of the existence of one factor common to both variance swaps and stocks, but the contribution of the market risk premium to the total variance premium is very small. These findings stress the importance of using variance-based instruments in the portfolio of an investor.
Download or read book Jump and Variance Risk Premia in the S P 500 written by Maximilian Neumann and published by . This book was released on 2019 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the risk premia embedded in the S&P 500 spot index and option markets. We use a long time-series of spot prices and a large panel of option prices to jointly estimate the diffusive stock risk premium, the Price jump risk premium, the diffusive variance risk premium and the variance jump risk premium. The risk premia are statistically and economically significant and move over time. Investigating the economic drivers of the risk premia, we are able to explain up to 63% of these variations.
Download or read book Downside Variance Risk Premium written by Bruno Feunou and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Information Environment and Equity Risk Premium Volatility Around the World written by Sie Ting Lau and published by . This book was released on 2014 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines whether and how differences in investors' information environment are related to cross-country differences in the market risk premium volatility. We use the vector-autoregressive and implied cost of capital methods to extract time variation in risk premiums for 41 developed and emerging markets worldwide. Consistent with theoretical predictions, countries with better information environments tend to experience a lower risk premium volatility, even after controlling for various country variables that are potentially associated with variation in risk premiums. Our analysis of two exogenous events, specifically the 1997 Asian financial crisis and 2008 global financial crisis, further corroborates our key finding that the information environment plays an important role in explaining the market risk premium volatility.
Download or read book Volatility of Volatility Expected Stock Return and Variance Risk Premium written by Ruoyang Wang and published by . This book was released on 2015 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Theory suggests a relationship between both volatility of volatility, variance risk premium, and the equity risk premium. We empirically investigate the relationship between volatility of volatility and the equity risk premium, and the relationship between the variance risk premium and the equity risk premium. We find that volatility of volatility alone explains 5 to 10% of the total variation of equity risk premium, and together with VIX data, it explains more than 20% of the total variation of equity premium. We fail to find a significant relationship between volatility of volatility and the variance risk premium.We use six measures of volatility of volatility based on non-parametric models, a GARCH model and VVIX data.
Download or read book The Variance Risk Premium and Fundamental Uncertainty written by Christian Conrad and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
