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Implied Volatility Duration: A Measure for the Timing of Uncertainty Resolution
- Source :
- Journal of Financial Economics. 140(1):127-144
- Publication Year :
- 2021
- Publisher :
- Elsevier, 2021.
-
Abstract
- 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, more than 5% 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.
- Subjects :
- 040101 forestry
502009 Corporate finance
Economics and Econometrics
050208 finance
General equilibrium theory
Strategy and Management
05 social sciences
04 agricultural and veterinary sciences
Implied volatility
Resolution (logic)
Measure (mathematics)
502009 Finanzwirtschaft
Accounting
0502 economics and business
Economics
Econometrics
0401 agriculture, forestry, and fisheries
Capital asset pricing model
Portfolio
Duration (project management)
Preference (economics)
Finance
Subjects
Details
- Language :
- English
- ISSN :
- 0304405X
- Volume :
- 140
- Issue :
- 1
- Database :
- OpenAIRE
- Journal :
- Journal of Financial Economics
- Accession number :
- edsair.doi.dedup.....7daf1d08a3b1772f4c5dc333af2a7c29