I thank seminar participants at Cass Business School, Grenoble Ecole de Management, Lancaster University Management School and discussants at EFMA 2010 Meetings and FMA 2010 Meetings for valuable feedback. I am grateful to the Editor, Bob Webb, for a smooth editorial process and an anonymous reviewer for valuable comments and suggestions, which improved the study significantly. Usual disclaimer applies.
Aggregate Volatility and Market Jump Risk: An Option-Based Explanation to Size and Value Premia
Article first published online: 11 DEC 2012
© 2012 Wiley Periodicals, Inc.
Journal of Futures Markets
Volume 34, Issue 1, pages 34–55, January 2014
How to Cite
Arisoy, Y. E. (2014), Aggregate Volatility and Market Jump Risk: An Option-Based Explanation to Size and Value Premia. J. Fut. Mark., 34: 34–55. doi: 10.1002/fut.21589
- Issue published online: 6 DEC 2013
- Article first published online: 11 DEC 2012
- Manuscript Accepted: 12 SEP 2012
- Manuscript Received: 25 JAN 2011
It is well documented that stock returns have different sensitivities to changes in aggregate volatility, however less is known about their sensitivity to market jump risk. By using S&P 500 crash-neutral at-the-money straddle and out-of-money put returns as proxies for aggregate volatility and market jump risk, I document significant differences between volatility and jump loadings of value versus growth, and small versus big portfolios. In particular, small (big) and value (growth) portfolios exhibit negative (positive) and significant volatility and jump betas. I also provide further evidence that both volatility and jump risk factors are priced and negative. © 2012 Wiley Periodicals, Inc. Jrl Fut Mark 34:34–55, 2014