Bollerslev, Tim; Zhou, Hao - School of Economics and Management, University of Aarhus - 2007
We find that the difference between implied and realized variation, or the variance risk premium, is able to explain … predictability of the variance risk premium easily dominates that afforded by standard predictor variables like the P/E ratio, the … dividend yield, the default spread, and the consumption-wealth ratio (CAY). Moreover, combining the variance risk premium with …