Bollerslev, Tim; Gibson, Michael; Zhou, Hao - School of Economics and Management, University of Aarhus - 2007
This paper proposes a method for constructing a volatility risk premium, or investor risk aversion, index. The method … volatilities indicates significant temporal dependencies in the estimated stochastic volatility risk premium, which we in turn … relate to a set of macro-finance state variables. We also find that the extracted volatility risk premium helps predict …