Recent empirical evidence suggests that the variance risk premium, or the difference between risk-neutral and statistical expectations of the future return variation, predicts aggregate stock market returns, with the predictability especially strong at the 2-4 month horizons. We provide extensive Monte Carlo simulation evidence that statistical finite sample biases in the overlapping return regressions underlying these findings can not ``explain" this apparent predictability. Further corroborating the existing empirical ...
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Recent empirical evidence suggests that the variance risk premium, or the difference between risk-neutral and statistical expectations of the future return variation, predicts aggregate stock market returns, with the predictability especially strong at the 2-4 month horizons. We provide extensive Monte Carlo simulation evidence that statistical finite sample biases in the overlapping return regressions underlying these findings can not ``explain" this apparent predictability. Further corroborating the existing empirical evidence, we show that the patterns in the predictability across different return horizons estimated from country specific regressions for France, Germany, Japan, Switzerland and the U.K. are remarkably similar to the pattern previously documented for the U.S. Defining a ``global" variance risk premium, we uncover even stronger predictability and almost identical cross-country patterns through the use of panel regressions that effectively restrict the compensation for world-wide variance risk to be the same across countries. Our findings are broadly consistent with the implications from a stylized two-country general equilibrium model explicitly incorporating the effects of world-wide time-varying economic uncertainty.
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Add this copy of Finance and Economics Discussion Series: Stock Return to cart. $27.91, new condition, Sold by Booksplease rated 4.0 out of 5 stars, ships from Southport, MERSEYSIDE, UNITED KINGDOM, published 2013 by Bibliogov.
Add this copy of Finance and Economics Discussion Series: Stock Return to cart. $37.36, good condition, Sold by Bonita rated 4.0 out of 5 stars, ships from Newport Coast, CA, UNITED STATES, published 2013 by Bibliogov.