Corradi, Valentina, Distaso, Walter and Mele, Antonio (2008) Macroeconomic determinants of stock market volatility and volatility risk-premia. In: 2008 North American Summer Meeting of the Econometric Society, Pittsburgh, PA, 19-22 Jun 2008 (Unpublished)

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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 volatility. We develop a model in which return volatility is 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 payoffs indexed to nonparametric measures of realized volatility. We find that volatility risk-premia are strongly countercyclical and that in turn, they are of substantial help in predicting future economic activity.

Item Type:	Conference Item (Paper)
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HG Finance
Divisions:	Faculty of Social Sciences > Economics
Date:	20 June 2008
Status:	Not Peer Reviewed
Publication Status:	Unpublished
Conference Paper Type:	Paper
Title of Event:	2008 North American Summer Meeting of the Econometric Society
Type of Event:	Conference
Location of Event:	Pittsburgh, PA
Date(s) of Event:	19-22 Jun 2008
Related URLs:	Organisation
URI:	http://wrap.warwick.ac.uk/id/eprint/45829

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