The VIX's term structure of individual active stocks

Mahmoud Qadan, Or David, Iyad Snunu and Kerem Shuval

Finance Research Letters, 2024, vol. 61, issue C

Abstract: We create the VIX's term structure of five US active stocks over the next 1 to 12 months and examine how the shape of the VIX's term structure affects the evolution of the stocks’ prices. We find that the level, slope, and curvature of the VIX's term structure are significant predictors of future returns. Decomposing the VIX of individual stocks into physical volatility and variance risk premiums reveals that the variance risk premium of individual stocks is a significant predictor of future returns. Finally, the VIX and variance risk premiums of individual stocks are priced differently for different time horizons.

Keywords: Return predictability; Variance risk premium; VIX; Volatility index (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:61:y:2024:i:c:s1544612324000667

DOI: 10.1016/j.frl.2024.105036

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