Variance Risk Premiums in Emerging Markets

93 Pages Posted: 25 Jun 2018 Last revised: 2 Aug 2021

See all articles by Fang Qiao

Fang Qiao

University of International Business and Economics (UIBE) - School of Banking and Finance

Lai Xu

Syracuse University

Xiaoyan Zhang

Tsinghua University - PBC School of Finance

Hao Zhou

Tsinghua University - PBC School of Finance; SUSTech Business School

Date Written: May 1, 2019

Abstract

We provide first time the emerging market variance risk premiums (EMVRP) from 2006 to 2019, based on nine emerging stocks and options markets---Brazil, China, India, South Korea, Mexico, Poland, Russia, South Africa, and Taiwan. The EMVRP significantly predicts international stock returns and currency appreciation rates, especially for horizons longer than five months. This is in sharp contrast with the predictive pattern of the developed market variance risk premium (DMVRP), which is more important over horizons shorter than five months. These findings are consistent with an illustrative model incorporating partial market integration and heterogeneous economic uncertainty.

Keywords: Variance risk premium, emerging markets, stock return predictability, currency return predictability, market integration, economic uncertainty

JEL Classification: G12, G13, G15

Suggested Citation

Qiao, Fang and Xu, Lai and Zhang, Xiaoyan and Zhou, Hao, Variance Risk Premiums in Emerging Markets (May 1, 2019). Available at SSRN: https://ssrn.com/abstract=3199522 or http://dx.doi.org/10.2139/ssrn.3199522

Fang Qiao (Contact Author)

University of International Business and Economics (UIBE) - School of Banking and Finance ( email )

No.10, Huixindong Street
Chaoyang District
Beijing, 100029
China

Lai Xu

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

Xiaoyan Zhang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Hao Zhou

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing, 100083
China
+86-10-62790655 (Phone)

SUSTech Business School ( email )

1088 Xueyuan Avenue, Nanshan District
Southern University of Science and Technology
Shenzhen, Guangdong
China
+86-0755-88010464 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
385
Abstract Views
2,277
rank
114,014
PlumX Metrics