Can unpredictable risk exposure be priced?

• 成果类型: Article
• 署名作者: Barahona, Ricardo; Driessen, Joost; Frehen, Rik
• 署名单位: Erasmus University Rotterdam - Excl Erasmus MC; Erasmus University Rotterdam; Tilburg University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.08.006
• 发表日期: 2021
• 页码: 522-544
• 关键词: Ambiguity aversion; Beta uncertainty; Hedging demand; Price of risk

摘要

We study the link between beta predictability and the price of risk. An investor who desires exposure to a certain risk factor needs to predict what next period's beta will be. We use a simple model to show that an ambiguity averse agent's demand is lower when betas are hard to predict, leading to a reduction in risk premiums. We test the implications for downside betas and VIX betas. We find that they have economically and statistically small prices of risk once we account for the fact that an investor cannot observe ex-post realized betas when determining asset demand. (C) 2020 Published by Elsevier B.V.