Conditional Equity Premia and Realized Jump Risk
Speaker:Dr. Kent Wang
Wang Yanan Institute for Studies in Economics (WISE)
Xiamen University
Date & Time:15 Nov 2012 (Thursday) 10:00
Venue:WLG113
Organized by:Department of Mathematics

Abstract

We provide solid evidence that realized jump or observable jump risk measures forecast excess stock market returns, in-sample and out-of-sample. The predictive power remains statistically significant and economically important, even when we control for variance premium and other well documented predictors in the literature. Our findings are robust to alternative jump-signing and detection methods. We also find that “skewness” is an imperfect proxy for jump risk and it cannot forecast stock return, while realized jump plus variance premium cleanly span the conditional equity premia driven by short-run risk factors. Finally, our realized jump risk measures can forecast one-month-ahead VIX changes and three-month ahead macroeconomic activities.

Biography

Dr. Kent Wang is currently the Associate Professor and Director of International Education and Cooperation Centre of WISE of Xiamen University. He is also the member of National Economic Research Society (Australia), Accounting and Finance Association of Australia and New Zealand (AFAANZ), Asia Finance Association (Asian FA) and American Finance Association (AFA). Prof. Wang obtained his Ph.D. in The Australian National University (ANU). His journal paper has ranked No. 1 under 4 topics in SSRN “Top Ten” Journal Paper. He also received The Best Instructor Award (Study-Abroad Program) and Teaching Excellency Award from Xiamen University in 2010. Prof. Wang’s publication includes, Two factor decomposition analysis of correlation structures of mainland China and Hong Kong stock market, Bad Beta and Good Beta: A State Space Method for Decomposing market returns, and Market Price of Risk: As international comparison among US, UK, Australia and Japan etc.