Asymmetric pricing of implied systematic volatility in the cross‐section of expected returns

Jared DeLisle, James Doran () and David R. Peterson

Journal of Futures Markets, 2011, vol. 31, issue 1, 34-54

Abstract: Assuming a symmetric relation between returns and innovations in implied market volatility, Ang, A., Hodrick, R., Xing, Y., and Zhang, X. (2006) find that sensitivities to changes in implied market volatility have a cross‐sectional effect on firm returns. Dennis, P., Mayhew, S., and Stivers, C. (2006), however, find an asymmetric relation between firm‐level returns and implied market volatility innovations. We incorporate this asymmetry into the cross‐sectional relation between sensitivity to volatility innovations and returns. Using both portfolio sorting and firm‐level regressions, we find that sensitivity to VIX innovations is negatively related to returns when volatility is rising, but is unrelated when it is falling. The negative relation is robust to controls for other variables, suggesting only the increase in implied market volatility is a priced risk factor. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:34–54, 2011

Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://hdl.handle.net/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:31:y:2011:i:1:p:34-54

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().