We proxy uncertainty in the stock oil and gold markets with the variance risk premia, extracted from futures and option contracts. We observe that an independent increase in the stock, oil or gold markets uncertainty coincides with negative returns in different industries. However, only the stock market uncertainty is a systematic priced factor in the entire cross section of stocks' expected returns. The oil price uncertainty is a sector-specific factor, and due to the industry segmentation of the market, it is only priced within oil-relevant industries. Gold price uncertainty is an asset-specific factor that is neither priced across nor within industries. (C) 2017 Elsevier B.V. All rights reserved.
|Number of pages||16|
|Journal||Journal of Empirical Finance|
|Publication status||Published - Dec 2017|
- VARIANCE RISK PREMIA
- CONSISTENT COVARIANCE-MATRIX
- VOLATILITY RISK
- EXPECTED RETURNS