The DOI matches its Crossref record; 33 of the 33 references it cites were found in a registry or an index.
What's Vol Got to Do with It
Abstract
Uncertainty plays a key role in economics, finance, and decision sciences. Financial markets, in particular derivative markets, provide fertile ground for understanding how perceptions of economic uncertainty and cash-flow risk manifest themselves in asset prices. We demonstrate that the variance premium, defined as the difference between the squared VIX index and expected realized variance, captures attitudes toward uncertainty. We show conditions under which the variance premium displays significant time variation and return predictability. A calibrated, generalized long-run risks model generates a variance premium with time variation and return predictability that is consistent with the data, while simultaneously matching the levels and volatilities of the market return and risk-free rate. Our evidence indicates an important role for transient non-Gaussian shocks to fundamentals that affect agents' views of economic uncertainty and prices.
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Cites
Heston, S. L. (1993) · Review of Financial Studies · doi:10.1093/rfs/6.2.327 · Cited by 8,762
The Econometrics of Financial Markets
Campbell, J. Y., Lo, A. W., & MacKinlay, A. C. (2012) · Princeton University Press eBooks · doi:10.2307/j.ctt7skm5 · Cited by 5,875
The Impact of Uncertainty Shocks
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The Econometrics of Financial Markets
Campbell, J. Y., Lo, A. W., & MacKinlay, A. C. (1997) · doi:10.1515/9781400830213 · Cited by 5,008
The Cross‐Section of Volatility and Expected Returns
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Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles
Bansal, R., & Yaron, A. (2004) · The Journal of Finance · doi:10.1111/j.1540-6261.2004.00670.x · Cited by 4,242
Self-citationPredicting excess stock returns out of sample: Can anything beat the historical average?
Campbell, J. Y., & Thompson, S. B. (2008) · Review of Financial Studies · doi:10.1093/rfs/hhm055 · Cited by 2,919
Transform Analysis and Asset Pricing for Affine Jump-diffusions
Duffie, D., Pan, J., & Singleton, K. J. (2000) · Econometrica · doi:10.1111/1468-0262.00164 · Cited by 2,712
Stock Prices, Earnings, and Expected Dividends
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Cited by
Risk, uncertainty and monetary policy
Bekaert, G., Hoerova, M., & Lo Duca, M. (2013) · Journal of Monetary Economics · doi:10.1016/j.jmoneco.2013.06.003 · Cited by 1,235
Can Time‐Varying Risk of Rare Disasters Explain Aggregate Stock Market Volatility?
WACHTER, J. A. (2013) · The Journal of Finance · doi:10.1111/jofi.12018 · Cited by 910
BOLLERSLEV, T., & TODOROV, V. (2011) · The Journal of Finance · doi:10.1111/j.1540-6261.2011.01695.x · Cited by 804
The Price of Political Uncertainty: Theory and Evidence from the Option Market
KELLY, B., PÁSTOR, Ľ., & VERONESI, P. (2016) · The Journal of Finance · doi:10.1111/jofi.12406 · Cited by 760
News implied volatility and disaster concerns
Manela, A., & Moreira, A. (2017) · Journal of Financial Economics · doi:10.1016/j.jfineco.2016.01.032 · Cited by 721
Metadata
- Authors
- Drechsler, I., & Yaron, A.
- Venue
- Review of Financial Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 2010-09-26
- Volume
- 24
- Issue
- 1
- Pages
- 1-45
- ISSN
- 0893-9454 (ISSN-L)
- 1465-7368
- OpenAlex
- W3121302379
- Cited by
- 674
- References
- 33
- FWCI
- 62.50
- Type
- journal article
- Language
- en
- Open access
- closed
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
