This paper investigates the intertemporal relation between volatility spreads and expected returns on the aggregate stock market. We provide evidence for a significantly negative link between volatility spreads and expected returns at the daily and weekly frequencies. We argue that this link is...

This paper investigates the intertemporal relation between volatility spreads and expected returns on the aggregate stock market. We provide evidence for a signi ficantly negative link between volatility spreads and expected returns at the daily and weekly frequencies. We argue that this link is...

Prior research documents that volatility spreads predict stock returns. If the trading activity of informed investors is an important driver of volatility spreads, then the predictability of stock returns should be more pronounced during major information events. This paper investigates whether...