Validity, tightness, and forecasting power of risk premium bounds

• 成果类型: Article
• 署名作者: Back, Kerry; Crotty, Kevin; Kazempour, Seyed Mohammad
• 署名单位: Rice University; Rice University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2022.02.003
• 发表日期: 2022
• 页码: 732-760
• 关键词: risk premia; bounds; Conditional tests; predictability; forecasting

摘要

Recent work uses option prices to derive lower bounds for the risk premia of the market portfolio and individual stocks. We test the bounds conditionally. We cannot reject that they are valid, but we do reject that they are tight. Using the market bounds as forecasts appears unreasonable in many cases due to their high slackness. Adding past mean slackness is a potential improvement but is hampered by the brevity of the available data series. The correlation of the stock bounds with subsequent returns stems primarily from the time series rather than the cross section. (c) 2022 Elsevier B.V. All rights reserved.