Changing Risk-Return Profiles

Richard Crump, Miro Everaert (), Domenico Giannone and C. Sean Hundtofte ()
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Miro Everaert: Formerly Federal Reserve Bank of New York; Currently, Freddie Mac
C. Sean Hundtofte: Solve Finance

A chapter in Recent Advances in Econometrics and Statistics, 2024, pp 283-302 from Springer

Abstract: Abstract We show that realized volatility in market returns and financial sector stock returns has strong predictive content for the future distribution of market returns. This is a robust feature of the last century of U.S. data and, most importantly, can be exploited in real time. Current realized volatility has the most information content on the uncertainty of future returns, whereas it has only limited content about the location of the future return distribution. When volatility is low, the predicted distribution of returns is less dispersed and probabilistic forecasts are sharper.

Date: 2024
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Working Paper: Changing Risk-Return Profiles (2018)
Working Paper: Changing Risk-Return Profiles (2018)
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DOI: 10.1007/978-3-031-61853-6_15

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