IDEAS home Printed from https://ideas.repec.org/a/wly/complx/v2022y2022i1n6813797.html

Volatility Risk Premium, Return Predictability, and ESG Sentiment: Evidence from China’s Spots and Options’ Markets

Author

Listed:
  • Zhaohua Liu
  • Susheng Wang
  • Siyi Liu
  • Haixu Yu
  • He Wang

Abstract

This study investigates the volatility risk premium on the emerging financial market. We also consider the expected return and ESG sentiment. Based on the SSE 50 ETF 5‐minute high‐frequency spots and daily options data from 2016 to 2021, we adopt nonparametric model‐free approaches to calculate realized and implied volatilities. And the volatility risk premium is constructed by subtracting these volatility series. We examine the relations between the volatility risk premium and future excess returns as well as ESG sentiment through multifactor specifications. We find that the volatility risk premium also exists in the Chinese market and is significantly negative. In addition, the statistically positive correlation between the volatility risk premium and aggregate returns is an outlier compared to the empirically negative pattern in developed markets. At last, ESG sentiment is positively associated with the volatility risk premium, especially the impact of environmental and social. This evidence supports the agency theory, which indicates that investors perceive ESG investments as waste resources in a short term and become potentially risky.

Suggested Citation

Handle: RePEc:wly:complx:v:2022:y:2022:i:1:n:6813797
DOI: 10.1155/2022/6813797
as

Download full text from publisher

File URL: https://doi.org/10.1155/2022/6813797
Download Restriction: no
File URL: https://libkey.io/10.1155/2022/6813797?utm_source=ideas
LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
---><---

More about this item

Statistics

Access and download statistics

Corrections

All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:complx:v:2022:y:2022:i:1:n:6813797. See general information about how to correct material in RePEc.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

We have no bibliographic references for this item. You can help adding them by using this form .

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://onlinelibrary.wiley.com/journal/8503 .

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.