The term structure of systematic and idiosyncratic risk
Marcel Prokopczuk () and
Chardin Wese Simen
Journal of Futures Markets, 2019, vol. 39, issue 4, 435-460
We study the term structure of variance (total risk), systematic, and idiosyncratic risk. Consistent with the expectations hypothesis, we find that, for the entire market, the slope of the term structure of variance is mainly informative about the path of future variance. Thus, there is little indication of a time‐varying term premium. Turning the focus to individual stocks, we cannot reject the expectations hypothesis for systematic variance, but we strongly reject it for idiosyncratic variance. Our results are robust to jumps and potential statistical biases.
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Working Paper: The Term Structure of Systematic and Idiosyncratic Risk (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:39:y:2019:i:4:p:435-460
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