Arbeitspapier
Downside Variance Risk Premium
We decompose the variance risk premium into upside and downside variance risk premia. These components reflect market compensation for changes in good and bad uncertainties. Their difference is a measure of the skewness risk premium (SRP), which captures asymmetric views on favorable versus undesirable risks. Empirically, we establish that the downside variance risk premium (DVRP) is the main component of the variance risk premium. We find a positive and significant link between the DVRP and the equity premium, and a negative and significant relation between the SRP and the equity premium. A simple equilibrium consumption-based asset pricing model supports our decomposition.
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Canada Working Paper ; No. 2015-36
- Classification
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
- Subject
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Asset pricing
- Event
-
Geistige Schöpfung
- (who)
-
Feunou, Bruno
Jahan-Parvar, Mohammad R.
Okou, Cédric
- Event
-
Veröffentlichung
- (who)
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Bank of Canada
- (where)
-
Ottawa
- (when)
-
2015
- DOI
-
doi:10.34989/swp-2015-36
- Handle
- Last update
- 10.03.2025, 11:44 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Feunou, Bruno
- Jahan-Parvar, Mohammad R.
- Okou, Cédric
- Bank of Canada
Time of origin
- 2015
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