Why do rational investors like variance at the peak of a crisis? A learning-based explanation

• 成果类型: Article
• 署名作者: Ghaderi, Mohammad; Kilic, Mete; Seo, Sang Byung
• 署名单位: University of Kansas; University of Southern California; University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2023.08.006
• 发表日期: 2024
• 关键词: Negative variance risk premium; Bayesian learning; Rational investors; Good uncertainty; Crisis dynamics

摘要

Investors' learning can drastically alter the dynamics of the variance risk premium: it no longer increases as economic conditions deteriorate but exhibits a highly nonlinear pattern, occasionally even turning negative. We demonstrate this intuition using a model where investors rationally form their belief about the hidden economic state. When the badstate becomes probable, investors start liking high future variance because it overwhelmingly correlates with lower marginal utility. This mechanism rationalizes the puzzling observation that risk -neutral volatility falls short of physical volatility at the peak of a severe crisis. Our results shed light on the interpretation of good economic uncertainty.