Purpose – The purpose of this paper is to examine if the enactment of Sarbanes-Oxley (SOX) resulted in lower risk premium and return volatility in the US stock markets. The paper examines the two components of excess return (total risk premium) separately: the amount of volatility (risk) and...

This paper presents evidence that the foreign exchange appreciation is predictable by the currency variance risk premium at a medium 6-month horizon and by the stock variance risk premium at a short 1-month horizon. Although currency variance risk premiums are highly correlated with each other...

This article reviews the predictability evidence on the variance risk premium: ( a) It predicts significant positive risk premia across equity, bond, currency, and credit markets; ( b) the predictability peaks at few-month horizons and dies out afterward; ( c) such a short-run predictability is...

We find that firm-level variance risk premium, estimated as the difference between option-implied and expected variances, has a prominent explanatory power for credit spreads in the presence of market- and firm-level risk control variables identified in the existing literature. Such a...

Recent empirical evidence suggests that the variance risk premium predicts aggregate stock market returns. We demonstrate that statistical finite sample biases cannot “explain” this apparent predictability. Further corroborating the existing evidence of the U.S., we show that country...