between stock returns and idiosyncratic return volatility at the firm level. By allowing for the volatility of the underlying … idiosyncratic choice variables to exhibit independent switches between a high and low volatility regime, we show that the options …' constant expected returns are composed of (i) a state dependent drift term that relates positively with the volatility regime …

This paper estimates how the shape of the implied volatility smile and the size of the variance risk premium relate to … parameters of GARCH-type time-series models measuring how conditional volatility responds to return shocks. Markets in which … return shocks lead to large increases in conditional volatility tend to have larger variance risk premia than markets in …

Prior research documents that volatility spreads predict stock returns. If the trading activity of informed investors … is an important driver of volatility spreads, then the predictability of stock returns should be more pronounced during … major information events. This paper investigates whether the predictability of equity returns by volatility spreads is …

Speculators who wish to bet on higher future volatility often purchase options to “go long volatility.” Should … investors who buy options expect to profit when realized volatility increases? If so, under what conditions? To answer these … questions, we conduct an analysis of the relationship between long volatility performance (buying options) and contemporaneous …

in volatility. The economic rationale for the effect is still controversial. The competing explanations have different … implications for the origin of the relationship: Are volatility changes induced by index movements, or inversely, does volatility … implied volatility and index return in Germany based on Granger causality tests and impulse-response functions. Our dataset …