1 option
The VIX, the Variance Premium and Stock Market Volatility / Geert Bekaert, Marie Hoerova.
- Format:
- Book
- Author/Creator:
- Bekaert, Geert.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w18995.
- NBER working paper series no. w18995
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2013.
- Summary:
- We decompose the squared VIX index, derived from US S&P500 options prices, into the conditional variance of stock returns and the equity variance premium. The latter is increasing in risk aversion in a wide variety of economic settings. We tackle several measurement issues assessing a plethora of state-of-the-art volatility forecasting models. We then examine the predictive power of the VIX and its two components for stock market returns and economic activity. The variance premium predicts stock returns but the conditional stock market variance predicts economic activity, and is more contemporaneously correlated with financial instability than is the variance premium.
- Notes:
- Print version record
- April 2013.
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