We comprehensively analyze the predictive power of several option implied variables for monthly S & P 500 excess returns and realized variance. The correlation risk premium (CRP) emerges as a strong predictor of both excess returns and realized variance. This is true both in- and out-of-sample....

Aggregate implied volatility spread (IVS), defined as the cross-sectional average difference in the implied volatilities of at-the-money call and put equity options, is significantly and positively related to future stock market returns at daily, weekly, monthly, to semiannual horizons. This...

This paper provides an empirical study on the predictability of implied volatility using dataset collected from the London over-the-counter currency option market. The present work is motivated by the lack of empirical studies that address implied volatility characteristics across various...

This paper investigates the predictive ability of international volatility risk for the daily aggregate Chinese stock market returns. We employ the innovations in implied volatility indices of seven major international markets as our international volatility risk proxies. We find that...

We construct a global implied volatility surface by combining information from the index options of twenty countries and regions. The convexity of the global surface positively predicts equity premia around the world, in- and out-of-sample, at horizons from one to twelve months. Semi-annually,...

Similar to the cross-sectional momentum crashes, the time series momentum experiences deep and persistent drawdowns in the stressed time of slumps in the upward momentum, rebounds in the downward momentum, and long time sideways market. We measure the upside and downside risk using the upper and...

This paper examines the evidence regarding predictability in the market risk premium using artificial neural networks (ANNs), namely the Elman Network (EN) and the Higher Order Neural network (HONN), univariate ARMA and exponential smoothing techniques, such as Single Exponential Smoothing (SES)...

Any time series can be decomposed into cyclical components fluctuating at different frequencies. Accordingly, in this paper we propose a method to forecast the stock market's equity premium which exploits the frequency relationship between the equity premium and several predictor variables. We...

Motivated by recent US evidence, we evaluate the predictive power of changes in the weight of large firms in the aggregate stock market ("Goliath vs David" (GVD)) for Swiss stock market returns and bond market returns. Previous research suggests that the asset return dynamics in the US and...

Recent general equilibrium models prescribe predictable dynamics in the volatility surfaces that are implied by observed option prices. In this paper we investigate the predictability of surfaces, using extensive time series of implied volatilities from over-the-counter options on eight...