Bekaert, Geert; Engstrom, Eric; Ermolov, Andrey - 2022
The equity variance risk premium is the expected compensation earned for selling variance risk in equity markets. The … variance risk premium is positive and shows moderate persistence. High variance risk premiums coincide with the left tail of …-based asset pricing models. We introduce a tractable habit model that does fit the data. In the model, the variance risk premium …