Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/172873
Authors: 
Prokopczuk, Marcel
Tharann, Björn
Wese Simen, Chardin
Year of Publication: 
2017
Series/Report no.: 
Hannover Economic Papers (HEP) 619
Abstract: 
We comprehensively analyze the predictive power of several option implied variables for monthly S & P 500 excess returns and realized variance. The correlation risk premium (CRP) emerges as a strong predictor of both excess returns and realized variance. This is true both in- and out-of-sample. A timing strategy based on the CRP leads to utility gains of more than 4.63% per annum. In contrast, the variance risk premium (VRP), which strongly predicts excess returns, does not lead to economic gains.
Subjects: 
Equity Premium
Option Implied Information
Portfolio Choice
Predictability
Timing Strategies
JEL: 
G10
G11
G17
Document Type: 
Working Paper

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