 Global predictive power of the upside and downside variances of the U.S. equity marketYahua Xu, Jun Xiao and Liguo Zhang Economic Modelling, 2020, vol. 93, issue C, 605-619 Abstract: Given the pace of increasing globalization and the pioneering role of the U.S. economy, we anlayze the global impact of the U.S. equity market’s uncertainty. The asymmetric impact of upside (downside) uncertainty, related with the upward (downward) movements of the underlying assets, has raised substantial concerns recently. We comprehensively analyze the global predictability of the upside and downside variances of the U.S. equity market, implied by S&P-500 calls and puts, respectively. We contribute to the literature on the asymmetric impacts of the upside and downside variances of the U.S. equity market in an international setting. Our study also complements the study on predicting international stock returns. Moreover, substantial economic value can be generated from the perspective of asset allocation. The main channel for the positive (negative) predictability of upside (downside) variance stems from its positive (negative) impacts on international investment, highlighting the leading role of the U.S. economy. Keywords: Return prediction; Upside and downside variances; The U.S. equity market; Economic value (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:93:y:2020:i:c:p:605-619 DOI: 10.1016/j.econmod.2020.09.006 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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