Corradi, Valentina, Distaso, Walter and Mele, Antonio (2008) Macroeconomic determinants of stock market returns, volatility and volatility risk-premia. Discussion paper, 616. Financial Markets Group, London School of Economics and Political Science, London, UK.
|
PDF
Download (394Kb) | Preview |
Abstract
This paper introduces a no-arbitrage framework to assess how macroeconomic factors help explain the risk-premium agents require to bear the risk of fluctuations in stock market volatil- ity. We develop a model in which return volatility and volatility risk-premia are stochastic and derive no-arbitrage conditions linking volatility to macroeconomic factors. We estimate the model using data related to variance swaps, which are contracts with payo¤s indexed to nonparametric measures of realized volatility. We nd that volatility risk-premia are strongly countercyclical, even more so than standard measures of return volatility.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | http://fmg.lse.ac.uk |
| Additional Information: | © 2008 The Authors |
| Uncontrolled Keywords: | Realized volatility, Volatility risk-premium, Macroeconomic factors, No arbitrage restrictions, Concentrated simulated general method of moments, Block-bootstrap. |
| Library of Congress subject classification: | H Social Sciences > HB Economic Theory |
| Sets: | Research centres and groups > Financial Markets Group (FMG) Collections > Economists Online |
| Rights: | http://www.lse.ac.uk/library/rights/LSERO.htm |
| Identification Number: | 616 |
| URL: | http://eprints.lse.ac.uk/24436/ |
Actions (login required)
 |
Record administration - authorised staff only |
