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Autoren: 
Konstantinidi, Eirini
Skiadopoulos, George
Datum: 
2014
Reihe/Nr.: 
Working Paper 732
Zusammenfassung: 
We explore whether the market variance risk premium (VRP) can be predicted. First, we propose a novel approach to measure VRP which distinguishes the investment horizon from the variance swap's maturity. We extract VRP from actual rather than synthetic S&P 500 variance swap quotes, thus avoiding biases in VRP measurement. Next, we find that a deterioration of the economy and of the trading activity, increases VRP. These relations hold both in- and out-of-sample for various maturities and investment horizons and they are economically significant. Volatility trading strategies which condition on the detected relations outperform popular buy-and-hold strategies even after transaction costs are considered.
Schlagwörter: 
Economic conditions
Predictability
Trading activity
Variance swaps
Variance risk premium
Volatility trading
JEL: 
G13
G17
Dokumentart: 
Working Paper
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