Author:
Bollerslev Tim,Marrone James,Xu Lai,Zhou Hao
Abstract
AbstractRecent empirical evidence suggests that the variance risk premium predicts aggregate stock market returns. We demonstrate that statistical finite sample biases cannot “explain” this apparent predictability. Further corroborating the existing evidence of the United States, we show that country-specific regressions for France, Germany, Japan, Switzerland, the Netherlands, Belgium, and the United Kingdom result in quite similar patterns. Defining a “global” variance risk premium, we uncover even stronger predictability and almost identical cross-country patterns through the use of panel regressions.
Publisher
Cambridge University Press (CUP)
Subject
Economics and Econometrics,Finance,Accounting
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