European Central Bank
Kaiserstrasse 29 D-60311
Frankfurt am Main, Germany
Information about this author at RePEc
NBER Working Papers and Publications
|April 2013||The VIX, the Variance Premium and Stock Market Volatility|
with Geert Bekaert: w18995
We decompose the squared VIX index, derived from US S&P500 options prices, into the conditional variance of stock returns and the equity variance premium. The latter is increasing in risk aversion in a wide variety of economic settings. We tackle several measurement issues assessing a plethora of state-of-the-art volatility forecasting models. We then examine the predictive power of the VIX and its two components for stock market returns and economic activity. The variance premium predicts stock returns but the conditional stock market variance predicts economic activity, and is more contemporaneously correlated with financial instability than is the variance premium.
Published: Bekaert, Geert & Hoerova, Marie, 2014. "The VIX, the variance premium and stock market volatility," Journal of Econometrics, Elsevier, vol. 183(2), pages 181-192. citation courtesy of
|September 2010||Risk, Uncertainty and Monetary Policy|
with Geert Bekaert, Marco Lo Duca: w16397
The VIX, the stock market option-based implied volatility, strongly co-moves with measures of the monetary policy stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility ("uncertainty"), we find that a lax monetary policy decreases both risk aversion and uncertainty, with the former effect being stronger. The result holds in a structural vector autoregressive framework, controlling for business cycle movements and using a variety of identification schemes for the vector autoregression in general and monetary policy shocks in particular.
Published: Bekaert, Geert & Hoerova, Marie & Lo Duca, Marco, 2013. "Risk, uncertainty and monetary policy," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 771-788. citation courtesy of