TY - JOUR
T1 - Volatility-of-Volatility Risk in Asset Pricing
AU - Chen, Te Feng
AU - Chordia, Tarun
AU - Chung, San Lin
AU - Lin, Ji Chai
N1 - Publisher Copyright:
© 2021 The Author(s) 2021. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please email: [email protected].
PY - 2022/3/1
Y1 - 2022/3/1
N2 - This paper develops a general equilibrium model and provides empirical support that the market volatility-of-volatility (VOV) predicts market returns and drives the time-varying volatility risk. In asset pricing tests with the market, volatility, and VOV as factors, the risk premium on VOV is statistically and economically significant and robust. Market and volatility risks are not priced in unconditional models, but, consistent with theory, their factor loadings, conditional on VOV, are priced. The pricing impact of VOV strengthens during market crashes, suggesting that VOV is particularly relevant during market turmoil, when investors demand increased compensation for VOV risk.
AB - This paper develops a general equilibrium model and provides empirical support that the market volatility-of-volatility (VOV) predicts market returns and drives the time-varying volatility risk. In asset pricing tests with the market, volatility, and VOV as factors, the risk premium on VOV is statistically and economically significant and robust. Market and volatility risks are not priced in unconditional models, but, consistent with theory, their factor loadings, conditional on VOV, are priced. The pricing impact of VOV strengthens during market crashes, suggesting that VOV is particularly relevant during market turmoil, when investors demand increased compensation for VOV risk.
UR - http://www.scopus.com/inward/record.url?scp=85126120422&partnerID=8YFLogxK
U2 - 10.1093/rapstu/raab018
DO - 10.1093/rapstu/raab018
M3 - 期刊論文
AN - SCOPUS:85126120422
SN - 2045-9920
VL - 12
SP - 289
EP - 335
JO - Review of Asset Pricing Studies
JF - Review of Asset Pricing Studies
IS - 1
ER -