Crashes, volatility, and the equity premium: Lessons from S&P 500 options

Detalhes bibliográficos
Autor(a) principal: Santa-Clara, Pedro
Data de Publicação: 2010
Outros Autores: Yan, Shu
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10362/14949
Resumo: We use a novel pricing model to imply time series of diffusive volatility and jump intensity from S&P 500 index options. These two measures capture the ex ante risk assessed by investors. Using a simple general equilibrium model, we translate the implied measures of ex ante risk into an ex ante risk premium. The average premium that compensates the investor for the ex ante risks is 70% higher than the premium for realized volatility. The equity premium implied from option prices is shown to significantly predict subsequent stock market returns.
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spelling Crashes, volatility, and the equity premium: Lessons from S&P 500 optionsWe use a novel pricing model to imply time series of diffusive volatility and jump intensity from S&P 500 index options. These two measures capture the ex ante risk assessed by investors. Using a simple general equilibrium model, we translate the implied measures of ex ante risk into an ex ante risk premium. The average premium that compensates the investor for the ex ante risks is 70% higher than the premium for realized volatility. The equity premium implied from option prices is shown to significantly predict subsequent stock market returns.MIT PressRUNSanta-Clara, PedroYan, Shu2015-05-14T08:33:40Z2010-052010-05-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10362/14949engThe Review of Economics and Statistics, V.92(2), p. 435-451info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2024-03-11T03:50:25Zoai:run.unl.pt:10362/14949Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-20T03:22:12.140622Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Crashes, volatility, and the equity premium: Lessons from S&P 500 options
title Crashes, volatility, and the equity premium: Lessons from S&P 500 options
spellingShingle Crashes, volatility, and the equity premium: Lessons from S&P 500 options
Santa-Clara, Pedro
title_short Crashes, volatility, and the equity premium: Lessons from S&P 500 options
title_full Crashes, volatility, and the equity premium: Lessons from S&P 500 options
title_fullStr Crashes, volatility, and the equity premium: Lessons from S&P 500 options
title_full_unstemmed Crashes, volatility, and the equity premium: Lessons from S&P 500 options
title_sort Crashes, volatility, and the equity premium: Lessons from S&P 500 options
author Santa-Clara, Pedro
author_facet Santa-Clara, Pedro
Yan, Shu
author_role author
author2 Yan, Shu
author2_role author
dc.contributor.none.fl_str_mv RUN
dc.contributor.author.fl_str_mv Santa-Clara, Pedro
Yan, Shu
description We use a novel pricing model to imply time series of diffusive volatility and jump intensity from S&P 500 index options. These two measures capture the ex ante risk assessed by investors. Using a simple general equilibrium model, we translate the implied measures of ex ante risk into an ex ante risk premium. The average premium that compensates the investor for the ex ante risks is 70% higher than the premium for realized volatility. The equity premium implied from option prices is shown to significantly predict subsequent stock market returns.
publishDate 2010
dc.date.none.fl_str_mv 2010-05
2010-05-01T00:00:00Z
2015-05-14T08:33:40Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
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status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10362/14949
url http://hdl.handle.net/10362/14949
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv The Review of Economics and Statistics, V.92(2), p. 435-451
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eu_rights_str_mv openAccess
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dc.publisher.none.fl_str_mv MIT Press
publisher.none.fl_str_mv MIT Press
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
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