Showing 1 - 6 of 6
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 the consumption growth distribution shifting down....
Persistent link: https://www.econbiz.de/10012481691
We identify the relative importance of changes in the conditional variance of fundamentals (which we call "uncertainty") and changes in risk aversion ("risk" for short) in the determination of the term structure, equity prices and risk premiums. Theoretically, we introduce persistent...
Persistent link: https://www.econbiz.de/10012466420
This paper studies time variation in expected excess bond returns. We run regressions of annual excess returns on forward rates. We find that a single factor predicts 1-year excess returns on 1-5 year maturity bonds with an R2 up to 43%. The single factor is a tent-shaped linear function of...
Persistent link: https://www.econbiz.de/10012469532
Will the stock market provide high returns in the future as it has in the past? The average US stock return in the postwar period has been about 8% above treasury bill rates. But that average is poorly measured: The standard confidence interval extends from 3% to 13%. Furthermore, expected...
Persistent link: https://www.econbiz.de/10012472418
Feedback from stock prices to cash flows occurs because information revealed by firms' stock prices influences the actions of competitors. We explore the implications of feedback within a noisy rational expectations setting with incumbent publicly traded firms and privately held new entrants. In...
Persistent link: https://www.econbiz.de/10012459278
We decompose the squared VIX index, derived from US S&P500 options prices, into the conditional variance of stock returns and the equity variance premium. The latter is increasing in risk aversion in a wide variety of economic settings. We tackle several measurement issues assessing a plethora...
Persistent link: https://www.econbiz.de/10012459667