Good and Bad Variance Premia and Expected Returns

• 成果类型: Article
• 署名作者: Kilic, Mete; Shaliastovich, Ivan
• 署名单位: University of Southern California; University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2017.2890
• 发表日期: 2019
• 页码: 2522-2544
• 关键词: variance premium; Return predictability; upside and downside risk

摘要

We measure good and bad variance premia that capture risk compensations for the realized variation in positive and negative market returns, respectively. The two variance premium components jointly predict excess returns over the next one and two years with statistically significant positive (negative) coefficients on the good (bad) component. The R(2)s reach about 10% for aggregate equity and portfolio returns and 20% for corporate bond returns. To explain the new empirical evidence, we develop a model that highlights the differential impact of upside and downside risk on equity and variance risk premia.