We provide evidence that agents have slow-moving beliefs about stock market volatility that lead to initial underreaction to volatility shocks followed by delayed overreaction. These dynamics are mirrored in the VIX and variance risk premiums which reflect investor expectations about volatility...

We provide evidence that agents have slow moving beliefs about stock market volatility. This is supported in survey data and is also reflected in firm level option prices. We embed these expectations into an asset pricing model and show that we jointly explain the following stylized facts (some...

We provide evidence that agents have slow-moving beliefs about stock market volatility that lead to initial underreaction to volatility shocks followed by delayed overreaction. These dynamics are mirrored in the VIX and variance risk premiums which reflect investor expectations about volatility...