Implied volatility duration: a measure for the timing of uncertainty resolution
- We introduce Implied Volatility Duration (IVD) as a new measure for the timing of uncertainty resolution, with a high IVD corresponding to late resolution. Portfolio sorts on a large cross-section of stocks indicate that investors demand on average about seven percent return per year as a compensation for a late resolution of uncertainty. In a general equilibrium model, we show that `late' stocks can only have higher expected returns than `early' stocks if the investor exhibits a preference for early resolution of uncertainty. Our empirical analysis thus provides a purely market-based assessment of the timing preferences of the marginal investor.
Author: | Christian SchlagORCiDGND, Julian ThimmeORCiDGND, Rüdiger Weber |
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URN: | urn:nbn:de:hebis:30:3-528964 |
DOI: | https://doi.org/10.2139/ssrn.2881993 |
Parent Title (English): | SAFE working paper series ; No. 265 |
Series (Serial Number): | SAFE working paper (265) |
Publisher: | SAFE |
Place of publication: | Frankfurt am Main |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 2020 |
Year of first Publication: | 2020 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2020/02/05 |
Tag: | Preference for early resolution of uncertainty; asset pricing; cross-section of expected stock returns; implied volatility |
Issue: | First version: December 7, 2016 ; This version: January 27, 2020 |
Page Number: | 78 |
Note: | A previous version of this paper was titled "Implied Volatility Duration and the Early Resolution Premium". |
HeBIS-PPN: | 46076263X |
Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
Wissenschaftliche Zentren und koordinierte Programme / Frankfurt MathFinance Institute (FMFI) | |
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Sammlungen: | Universitätspublikationen |
Licence (German): | Deutsches Urheberrecht |