The Variance Risk Premium Around the World

Juan M. Londono
2014 Social Science Research Network  
This paper investigates the variance risk premium in an international setting. First, I provide new evidence on the basic stylized facts traditionally documented for the US. I show that while the variance premiums in several other countries are, on average, positive and display signi...cant time variation, they do not predict local equity returns. Then, I extend the domestic model in Bollerslev, Tauchen and Zhou (2009) to an international setting. In light of the qualitative implications of my
more » ... implications of my model, I provide empirical evidence that the US variance premium outperforms that of all other countries in predicting local and foreign equity returns. JEL Classi...cation: E44, F36, G12, G13, G15.
doi:10.2139/ssrn.2517020 fatcat:ujr6zzun7zcmzcl5wtubjafwiq