We propose a long-run risk model with stochastic volatility, a time-varying mean reversion level of volatility, and … variance but driven by a separate process. We show that this separation of jump risk from volatility risk is needed to match … the empirically weak link between the level and the slope of the implied volatility smile for S&P 500 options. …

This paper examines long memory volatility in the cross-section of stock returns. We show that long memory volatility … capitalization, book-to-market ratio, prior performance and price jumps. Long memory volatility is negatively priced in the cross …-section. Buying stocks with shorter memory and selling stocks with longer memory in volatility generates significant excess returns of …

upside and downside components. Recent studies establish that this decomposition enhances volatility predictions, and …

allocation and risk management require estimates of the volatility of these factors. While realized volatility has become a … provide a statistical approach to estimate the volatility of these factors. The efficacy of this approach relative to the use … of models based on squared returns is demonstrated for forecasts of the market volatility and a portfolio allocation …

This paper examines the idiosyncratic volatility (IV) puzzle in the Indian stock market for the period 1999 … volatility and future stock returns. However, this relation is sensitive to the choices of portfolio weighting schemes, types of …

vector autoregressions with Markov switching in heteroskedasticity. We decompose changes in futures price volatility into … and increases the hedging costs of producers and processors of oil when volatility is high. …

realistic dynamics of riskneutral and realized volatilities. I provide evidence that the jump risk in volatility of long run … of the VIX or realized stock volatility. In contrast, a jump-in-volatility LRR model generates a smaller variance risk … premium but better fits the VIX and the realized stock volatility dynamics. Finally, jump-in-volatility models generate …

against price volatility can generate price volatility in equilibrium, even absent fundamental risk. Fearing that asset prices …

upside and downside components. Recent studies establish that this decomposition enhances volatility predictions, and …

individual stochastic discount factors. We prove that equity price volatility becomes arbitrarily large as the volatility of … aggregate output volatility falls. We propose a two-step spectral factorization method that permits closed-form solutions in the …