Conrad, Christian ; Loch, Karin
Preview |
PDF, English
Download (499kB) | Terms of use |
Citation of documents: Please do not cite the URL that is displayed in your browser location input, instead use the DOI, URN or the persistent URL below, as we can guarantee their long-time accessibility.
Abstract
We propose a new measure of the expected variance risk premium that is based on a forecast of the conditional variance from a GARCH-MIDAS model. We find that the new measure has strong predictive ability for future U.S. aggregate stock market returns and rationalize this result by showing that the new measure effectively isolates fundamental uncertainty as the factor that drives the variance risk premium.
| Document type: | Working paper |
|---|---|
| Series Name: | Discussion Paper Series, University of Heidelberg, Department of Economics |
| Volume: | 0583 |
| Place of Publication: | Heidelberg |
| Date Deposited: | 27 Feb 2015 17:56 |
| Date: | February 2015 |
| Number of Pages: | 10 |
| Faculties / Institutes: | The Faculty of Economics and Social Studies > Alfred-Weber-Institut for Economics |
| DDC-classification: | 330 Economics |
| Uncontrolled Keywords: | Variance risk premium, return predictability, VIX, GARCH-MIDAS, economic uncertainty, vol-of-vol |
| Series: | Discussion Paper Series / University of Heidelberg, Department of Economics |
