Please use this identifier to cite or link to this item: http://pandora.lib.unipi.gr/jspui/handle/unipi/1638
Title: The risk-return relation and VIX: evidence from the S&P 500
Authors: 
Citation: Empirical Economics June 2013, Volume 44, Issue 3, pp 1291-1314
Abstract: A significantly positive risk-return relation for the S&P 500 market index is detected if the squared implied volatility index (VIX) is allowed for as an exogenous variable in the conditional variance equation of the parsimonious GARCH(1,1) model. This result holds for both daily and weekly observations, for extended conditional mean and variance specifications, and is robust to sub-samples. We show that the conditional variance obtained from the GARCH model with VIX has better predictive ability for realized volatility than the conditional variance from GARCH without VIX and VIX itself, thereby documenting an important information content of VIX for conditional variance. The results are interpreted as evidence that adding VIX squared in the conditional variance equation yields a better measure of conditional variance which, subsequently, uncovers a strong risk-return relation.
URI: http://pandora.lib.unipi.gr/jspui/handle/unipi/1638
URLs: http://link.springer.com/article/10.1007%2Fs00181-012-0639-4
Appears in Collections:Δημοσιεύσεις σε Περιοδικά

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