Variance Risk Premiums in Emerging Markets: Global Integration and Economic Uncertainty

83 Pages Posted: 25 Jun 2018 Last revised: 9 May 2019

See all articles by Fang Qiao

Fang Qiao

Tsinghua University - PBC School of Finance

Lai Xu

Syracuse University

Xiaoyan Zhang

Tsinghua University - PBC School of Finance

Hao Zhou

SUSTech Business School; Tsinghua University - PBC School of Finance

Date Written: May 2019

Abstract

We construct variance risk premiums for the nine major emerging markets of Brazil, China, India, South Korea, Mexico, Poland, Russia, South Africa, and Taiwan from 2000 to 2017 using the sample-extension methodology in Lynch and Wachter (2013). Both the emerging market and developed market variance risk premiums can predict stock market returns. However, the former is more important for longer horizons (beyond four months), whereas the latter is more important for shorter horizons (within four months). The partial integration of emerging markets and global economic uncertainty exposure may explain these different predictability patterns.

Keywords: Variance risk premium, emerging markets, stock return predictability, market integration, economic uncertainty

JEL Classification: G12, G13, G15

Suggested Citation

Qiao, Fang and Xu, Lai and Zhang, Xiaoyan and Zhou, Hao, Variance Risk Premiums in Emerging Markets: Global Integration and Economic Uncertainty (May 2019). Available at SSRN: https://ssrn.com/abstract=3199522 or http://dx.doi.org/10.2139/ssrn.3199522

Fang Qiao (Contact Author)

Tsinghua University - PBC School of Finance ( email )

43 Chengfu Road
Beijing, Beijing 100083
China

Lai Xu

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

Xiaoyan Zhang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Hao Zhou

SUSTech Business School ( email )

1088 Xueyuan Avenue, Nanshan District
Southern University of Science and Technology
Shenzhen, Guangdong
China
+86-0755-88010464 (Phone)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing, 100083
China
+86-10-62790655 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
296
Abstract Views
1,742
rank
126,699
PlumX Metrics