Implied Volatility Duration: A Measure for the Timing of Uncertainty Resolution
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Datum
2020-01-27
Autor
Schlag, Christian
Thimme, Julian
Weber, Rüdiger
SAFE No.
265
Metadata
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Zusammenfassung
We introduce Implied Volatility Duration (IVD) as a new measure for the timing of uncertainty resolution, with a high IVD corresponding to late resolution. Portfolio sorts on a large cross-section of stocks indicate that investors demand on average about seven percent return per year as a compensation for a late resolution of uncertainty. In a general equilibrium model, we show that `late' stocks can only have higher expected returns than `early' stocks if the investor exhibits a preference for early resolution of uncertainty. Our empirical analysis thus provides a purely market-based assessment of the timing preferences of the marginal investor.
Forschungsbereich
Financial Markets
Schlagworte
preference for early resolution of uncertainty, implied volatility, cross-sectionof expected stock returns, asset pricing
JEL-Klassifizierung
G12, E44, D81
Forschungsdaten
Thema
Macro Finance
Consumption
Saving and Borrowing
Consumption
Saving and Borrowing
Beziehungen
1
Publikationstyp
Working Paper
Link zur Publikation
Collections
- LIF-SAFE Working Papers [334]