Downside variance risk premium

Bruno Feunou, Mohammad R. Jahan-Parvar and Cédric Okou

We decompose the variance risk premium into upside and downside variance risk premia. These components reflect market compensation for changes in good and bad uncertainties. Their difference is a measure of the skewness risk premium (SRP), which captures asymmetric views on favorable versus undesirable risks. Empirically, we establish that the downside variance risk premium (DVRP) is the main component of the variance risk premium. We find a positive and significant link between the DVRP and the equity premium, and a negative and significant relation between the SRP and the equity premium. A simple equilibrium consumption-based asset pricing model supports our decomposition.

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Year of publication:	2015
Authors:	Feunou, Bruno ; Jahan-Parvar, Mohammad R. ; Okou, Cédric
Publisher:	Ottawa : Bank of Canada
Subject:	Asset pricing \| Risikoprämie \| Risk premium \| Börsenkurs \| Share price \| CAPM \| Schätzung \| Estimation \| Streuungsmaß \| Measure of dispersion

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Extent:	Online-Ressource (IV, 67 S.) graph. Darst.
Series:	Staff working paper / Bank of Canada. - Ottawa : [Verlag nicht ermittelbar], ISSN 1701-9397, ZDB-ID 2278568-1. - Vol. 2015-36
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	Systemvoraussetzungen: PDF Reader Zsfassung in franz. Sprache
Other identifiers:	hdl:10419/123781 [Handle]
Classification:	G1 - General Financial Markets ; G12 - Asset Pricing
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10011350636