Details
| Original language | English |
|---|---|
| Pages (from-to) | 72-83 |
| Number of pages | 12 |
| Journal | Journal of Banking and Finance |
| Volume | 69 |
| Publication status | Published - 1 Jan 2016 |
Abstract
We analyze the risk premia embedded in the S&P 500 spot index and option markets. We use a long time-series of spot prices and a large panel of option prices to jointly estimate the diffusive stock risk premium, the price jump risk premium, the diffusive variance risk premium and the variance jump risk premium. The risk premia are statistically and economically significant and move over time. Investigating the economic drivers of the risk premia, we are able to explain up to 63% of these variations.
Keywords
- Equity risk premium, Jump risk premium, Markov Chain Monte Carlo, Options, S&P 500, Variance risk premium
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Finance
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Journal of Banking and Finance, Vol. 69, 01.01.2016, p. 72-83.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Jump and variance risk premia in the S&P 500
AU - Neumann, Maximilian
AU - Prokopczuk, Marcel
AU - Wese Simen, Chardin
N1 - Funding information: We thank Carol Alexander, Mike Chernov, John Doukas, Andreas Kaeck, Bradley Paye (discussant), seminar participants at the Technical University of Munich and the Financial Management Association meeting (2014) for comments. We are particularly grateful to two anonymous reviewers for detailed suggestions. Marcel Prokopczuk gratefully acknowledges financial support from the British Academy. Part of this project was completed when Maximilian visited the University of Reading.
PY - 2016/1/1
Y1 - 2016/1/1
N2 - We analyze the risk premia embedded in the S&P 500 spot index and option markets. We use a long time-series of spot prices and a large panel of option prices to jointly estimate the diffusive stock risk premium, the price jump risk premium, the diffusive variance risk premium and the variance jump risk premium. The risk premia are statistically and economically significant and move over time. Investigating the economic drivers of the risk premia, we are able to explain up to 63% of these variations.
AB - We analyze the risk premia embedded in the S&P 500 spot index and option markets. We use a long time-series of spot prices and a large panel of option prices to jointly estimate the diffusive stock risk premium, the price jump risk premium, the diffusive variance risk premium and the variance jump risk premium. The risk premia are statistically and economically significant and move over time. Investigating the economic drivers of the risk premia, we are able to explain up to 63% of these variations.
KW - Equity risk premium
KW - Jump risk premium
KW - Markov Chain Monte Carlo
KW - Options
KW - S&P 500
KW - Variance risk premium
UR - http://www.scopus.com/inward/record.url?scp=84979785015&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2016.03.013
DO - 10.1016/j.jbankfin.2016.03.013
M3 - Article
AN - SCOPUS:84979785015
VL - 69
SP - 72
EP - 83
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
ER -