Abstract

http://ssrn.com/abstract=1775249
 
 

References (47)



 
 

Citations (13)



 


 



Stock Return Predictability and Variance Risk Premia: Statistical Inference and International Evidence


Tim Bollerslev


Duke University - Finance; Duke University - Department of Economics; National Bureau of Economic Research (NBER)

James Marrone


Government of the United States of America - Division of Research and Statistics

Lai Xu


Duke University - Department of Economics

Hao Zhou


PBC School of Finance, Tsinghua University

August 2012


Abstract:     
Recent empirical evidence suggests that the variance risk premium predicts aggregate stock market returns. We demonstrate that statistical finite sample biases cannot “explain” this apparent predictability. Further corroborating the existing evidence of the U.S., we show that country specific regressions for France, Germany, Japan, Switzerland and the U.K. result in quite similar patterns. Defining a “global” variance risk premium, we uncover even stronger predictability and almost identical cross-country patterns through the use of panel regressions. These new findings are broadly consistent with the implications from a two-country general equilibrium model explicitly incorporating the effects of time-varying economic uncertainty.

Number of Pages in PDF File: 55

Keywords: Variance risk premium, return predictability, over-lapping return regressions, international stock market returns, global variance risk

JEL Classification: C12, C22, G12, G13

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Date posted: March 4, 2011 ; Last revised: August 8, 2012

Suggested Citation

Bollerslev, Tim and Marrone, James and Xu, Lai and Zhou, Hao, Stock Return Predictability and Variance Risk Premia: Statistical Inference and International Evidence (August 2012). Available at SSRN: http://ssrn.com/abstract=1775249 or http://dx.doi.org/10.2139/ssrn.1775249

Contact Information

Tim Bollerslev
Duke University - Finance ( email )
Durham, NC 27708-0120
United States
919-660-1846 (Phone)
919-684-8974 (Fax)
Duke University - Department of Economics
Durham, NC 27708-0204
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
James Marrone
Government of the United States of America - Division of Research and Statistics ( email )
20th and C Streets, NW
Washington, DC 20551
United States
Lai Xu
Duke University - Department of Economics ( email )
Durham, NC 27708-0204
United States
Hao Zhou (Contact Author)
PBC School of Finance, Tsinghua University ( email )
43 Chengfu Road, Haidian District
Beijing, 100083
China
+86-10-62790655 (Phone)
HOME PAGE: http://www.pbcsf.tsinghua.edu.cn
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