Explaining the Negative Returns to Volatility Claims: An Equilibrium Approach
نویسندگان
چکیده
We study the returns to investing in VIX futures and VIX Exchange Traded Notes (ETNs). We document a substantial negative return premium for both ETNs and the futures. For example, the a constant maturity portfolio of one-month VIX futures loses about 30% per year over our sample period (2006-2013). We propose an equilibrium model to explain these negative returns. In this model, increases in volatility endogenously lead to decreasing stock prices. Our model explains the negative expected returns to VIX futures and ETNs as well as several other stylized facts about the returns to VIX futures and VIX futures ETNs. JEL classification: G12, G13, C22, C58.
منابع مشابه
The Analysis of Real Exchange Rate Volatility and Stock Exchange Return with PANEL-GARCH Approach (Case Study: D8 Countries)
S tock returns of companies listed on the stock exchange is one of the most important criteria in assessing the macroeconomic. This study investigates the effect of exchange rate Volatility on the stock exchange Returns of D8 countries. It takes monthly data during the period (2008:1-2015:6) constituting 90 observations. At first we used Panel-GARCH model to estimate Exchange Rate Vo...
متن کاملExchange rate volatility and its effect on stock market volatility
This paper investigates empirically the effect of volatility of the exchange rate of the U.S. dollar vis-à-vis the euro on U.S. stock market volatility while controlling for a number of drivers of stock return volatility. Using a GARCH(1, 1) model and using weekly data covering the period from the week of January 1, 1999 through the week of January 25, 2010, it is found that the 9/11 terrorist ...
متن کاملAsset price volatility in a nonconvex general equilibrium model
Asset prices and returns are known to vary signi®cantly more than output or aggregate consumption growth, and an order of magnitude in excess of what is justi®ed by innovations to fundamentals. We study excess price volatility in a lifecycle economy with two assets (claims on capital and a public debt bubble), heterogeneous agents, and increasing returns to ®nancial intermediation. We show that...
متن کاملExplaining Accrual Anomaly Using Ohlson Method in Tehran Stock Exchange
One of the anomalies of the capital market is accrual anomaly. This anomaly refers to the negative relationship between returns and accruals. In the case of accrual anomaly, two behavioral and rational expectations have been raised. The main purpose of this study is to explain accrual anomaly using a new approach to distinguish an anomaly interpretation of risk interpretation. For this purpos...
متن کاملEssays in Asset Pricing
In the first chapter ``Gold, Platinum, and Expected Stock Returns'', I show that the ratio of gold to platinum prices (GP) reveals variation in risk and proxies for an important economic state variable. GP predicts future stock returns in the time-series and explains variation in average stock returns in the cross-section. GP outperforms existing predictors and similar patterns are found in int...
متن کامل