The dynamic dependencies in financial market volatility are generally well described by a long-memory fractionally integrated process. At the same time, the volatility risk premium, defined as the difference between the ex-post realized volatility and the market’s ex-ante expectation thereof,...

Stock market volatility clusters in time, appears fractionally integrated, carries a risk premium, and exhibits asymmetric leverage effects relative to returns. At the same time, the volatility risk premium, defined by the difference between the risk-neutral and objective expectations of the...

The paper undertakes a non-parametric analysis of the very high frequency movements in stock market volatility using very finely sampled data on the S&P VIX index compiled by the CBOE. The data suggest that stock market volatility is best described as a pure jump process without a continuous...

Stock market volatility clusters in time, appears fractionally integrated, carries a risk premium, and exhibits asymmetric leverage e®ects relative to returns. At the same time, the volatility risk premium, de¯ned by the di®erence between the risk-neutral and objective expectations of the...

Motivated by the implications from a stylized self-contained general equilibrium model incorporating the effects of time-varying economic uncertainty, we show that the difference between implied and realized variation, or the variance risk premium, is able to explain a non-trivial fraction of...

Stock market volatility clusters in time, carries a risk premium, is fractionally integrated, and exhibits asymmetric leverage effects relative to returns. This paper develops a first internally consistent equilibrium based explanation for these longstanding empirical facts. The model is cast in...

We propose a simple model in which realized stock market return volatility and implied volatility backed out of option prices are subject to common level shifts corresponding to movements between bull and bear markets. The model is estimated using the Kalman filter in a generalization to the...

We study the risk premium and leverage effect in the S&P500 market using the stochastic volatility-in-mean model of Barndor¤-Nielsen & Shephard (2001). The Merton (1973, 1980) equilibrium asset pricing condition linking the conditional mean and conditional variance of discrete time returns is...

We include simultaneously both realized volatility measures based on high-frequency asset returns and implied volatilities backed out of individual traded at the money option prices in a state space approach to the analysis of true underlying volatility. We model integrated volatility as a...

The paper discusses the use of statistical methods in the comparison of investment fund performance indicators. The analysis is based on the robust statistics proposed by Ledoit and Wolf (2008), for the pairwise comparison of funds and two generalizations for sets of multiple investment funds....