We propose a new decomposition of the variance risk premium (VRP) in terms of upside and downside VRPs. These …

This paper provides novel insights into the dynamic properties of variance and semivariance premia. Considering nine … international stock market indices, we find consistent evidence of significantly negative total and downside (semi)variance premia … the total variance premium is upward sloping for all of the considered indices. The slope is driven by upside semivariance …

We propose a new decomposition of the variance risk premium in terms of upside and downside variance risk premia. The … difference between upside and downside variance risk premia is a measure of skewness risk premium. We establish that the downside … variance risk premium is the main component of the variance risk premium, and that the skewness risk premium is a priced factor …