Details
| Original language | English |
|---|---|
| Pages (from-to) | 435-460 |
| Number of pages | 26 |
| Journal | Journal of Futures Markets |
| Volume | 39 |
| Issue number | 4 |
| Early online date | 11 Dec 2018 |
| Publication status | Published - 4 Mar 2019 |
Abstract
We study the term structure of variance (total risk), systematic, and idiosyncratic risk. Consistent with the expectations hypothesis, we find that, for the entire market, the slope of the term structure of variance is mainly informative about the path of future variance. Thus, there is little indication of a time-varying term premium. Turning the focus to individual stocks, we cannot reject the expectations hypothesis for systematic variance, but we strongly reject it for idiosyncratic variance. Our results are robust to jumps and potential statistical biases.
Keywords
- expectations hypothesis, idiosyncratic risk, implied correlation, model-free option-implied variance, options, systematic risk, term structure
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Accounting
- Business, Management and Accounting(all)
- Economics, Econometrics and Finance(all)
- Finance
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Journal of Futures Markets, Vol. 39, No. 4, 04.03.2019, p. 435-460.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - The term structure of systematic and idiosyncratic risk
AU - Hollstein, Fabian
AU - Prokopczuk, Marcel
AU - Wese Simen, Chardin
N1 - Funding information: We are grateful to Bob Webb (the editor), an anonymous associate referee, Alexander Feser (discussant), as well as participants at the meeting of the Swiss Society for Financial Market Research and several seminars for valuable comments.
PY - 2019/3/4
Y1 - 2019/3/4
N2 - We study the term structure of variance (total risk), systematic, and idiosyncratic risk. Consistent with the expectations hypothesis, we find that, for the entire market, the slope of the term structure of variance is mainly informative about the path of future variance. Thus, there is little indication of a time-varying term premium. Turning the focus to individual stocks, we cannot reject the expectations hypothesis for systematic variance, but we strongly reject it for idiosyncratic variance. Our results are robust to jumps and potential statistical biases.
AB - We study the term structure of variance (total risk), systematic, and idiosyncratic risk. Consistent with the expectations hypothesis, we find that, for the entire market, the slope of the term structure of variance is mainly informative about the path of future variance. Thus, there is little indication of a time-varying term premium. Turning the focus to individual stocks, we cannot reject the expectations hypothesis for systematic variance, but we strongly reject it for idiosyncratic variance. Our results are robust to jumps and potential statistical biases.
KW - expectations hypothesis
KW - idiosyncratic risk
KW - implied correlation
KW - model-free option-implied variance
KW - options
KW - systematic risk
KW - term structure
UR - http://www.scopus.com/inward/record.url?scp=85058240091&partnerID=8YFLogxK
U2 - 10.1002/fut.21985
DO - 10.1002/fut.21985
M3 - Article
AN - SCOPUS:85058240091
VL - 39
SP - 435
EP - 460
JO - Journal of Futures Markets
JF - Journal of Futures Markets
SN - 0270-7314
IS - 4
ER -