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.
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| Author: | Christian SchlagORCiDGND, Julian ThimmeORCiDGND, Rüdiger Weber |
|---|---|
| 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 |
