Journal of Financial and Quantitative Analysis Vol. 49 No. 3 2014
Stock Return Predictability and Variance Risk Premia: Statistical Inference and International Evidence
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 United States, we show that country-specific regressions for France, Germany, Japan, Switzerland, the Netherlands, Belgium, and the United Kingdom 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.
- DOI
- 10.1017/s0022109014000453
- Volume
- 49
- Issue
- 3
- Pages
- 633-661
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref