Time-varying uncertainty and variance risk premium
28 Pages Posted: 23 Oct 2017 Last revised: 1 Nov 2023
Date Written: January 7, 2019
Abstract
This paper extends the AK production model in Pindyck and Wang (2013) into a more general setting in which the volatility of capital stock is stochastic and driven by shocks. After solving the equilibrium, the fundamental shocks are embedded into the stock price and the leverage effect is contributed from three distinct channels. As an application, we employ our extended AK production model to match well the negative variance risk premium.
Keywords: Time-varying uncertainty; AK production model; asset pricing; variance risk premium.
JEL Classification: G12; G13; E44.
Suggested Citation: Suggested Citation
Ruan, Xinfeng and Zhang, Jin E., Time-varying uncertainty and variance risk premium (January 7, 2019). 2019 Financial Markets & Corporate Governance Conference, Journal of Macroeconomics, Vol. 69, 2021, Available at SSRN: https://ssrn.com/abstract=3056533 or http://dx.doi.org/10.2139/ssrn.3056533
Do you have negative results from your research you’d like to share?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.