The VIX's term structure of individual active stocks

Mahmoud Qadan, Or David, Iyad Snunu, Kerem Shuval

Research output: Contribution to journalArticlepeer-review

Abstract

We create the VIX's term structure of five US active stocks over the next 1 to 12 months and examine how the shape of the VIX's term structure affects the evolution of the stocks’ prices. We find that the level, slope, and curvature of the VIX's term structure are significant predictors of future returns. Decomposing the VIX of individual stocks into physical volatility and variance risk premiums reveals that the variance risk premium of individual stocks is a significant predictor of future returns. Finally, the VIX and variance risk premiums of individual stocks are priced differently for different time horizons.

Original languageEnglish
Article number105036
JournalFinance Research Letters
Volume61
DOIs
StatePublished - Mar 2024

Bibliographical note

Publisher Copyright:
© 2024

Keywords

  • Return predictability
  • Variance risk premium
  • VIX
  • Volatility index

ASJC Scopus subject areas

  • Finance

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