Working Paper
The variance risk premium around the world
Abstract: This paper investigates the variance risk premium in an international setting. First, I provide new evidence on the basic stylized facts traditionally documented for the US. I show that while the variance premiums in several other countries are, on average, positive and display significant time variation, they do not predict local equity returns. Then, I extend the domestic model in Bollerslev, Tauchen and Zhou (2009) to an international setting. In light of the qualitative implications of my model, I provide empirical evidence that the US variance premium outperforms that of all other countries in predicting local and foreign equity returns.
Access Documents
File(s): File format is text/html http://www.federalreserve.gov/pubs/ifdp/2011/1035/default.htm
File(s): File format is application/pdf http://www.federalreserve.gov/pubs/ifdp/2011/1035/ifdp1035.pdf
Authors
Bibliographic Information
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: International Finance Discussion Papers
Publication Date: 2011
Number: 1035