Implied volatility duration and the early resolution premium

We introduce Implied Volatility Duration (IVD) as a new measure for the timing of uncertainty resolution, with a high IVD corresponding to late resolution. Portfolio sorts on a large cross-section of stocks indicate that investors demand on average more than five percent return per year as a compensation for a late resolution of uncertainty. In a general equilibrium model, we show that "late" stocks can only have higher expected returns than "early" stocks, if the investor exhibits a preference for early resolution of uncertainty. Our empirical analysis thus provides a purely market-based assessment of the timing preferences of the marginal investor.