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Expected market returns: SVIX, realized volatility, and the role of dividends*

* This paper is a replication of an original study

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  • Matthijs Lof

Abstract

This note provides a replication of Martin's (Quarterly Journal of Economics, 2017, 132(1), 367–433) finding that the implied volatility measure SVIX predicts US stock market returns up to 12‐month horizons. I find that this result holds for both S&P 500 and CRSP market returns, regardless of whether returns include or exclude dividends. The predictability largely disappears after the SVIX index is replaced by an exponentially weighted moving average measure of realized volatility, suggesting that SVIX holds incremental forward‐looking information compared to realized volatility, despite the high correlation between the two volatility measures.

Suggested Citation

  • Matthijs Lof, 2019. "Expected market returns: SVIX, realized volatility, and the role of dividends," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 34(5), pages 858-864, August.
    • Handle: RePEc:wly:japmet:v:34:y:2019:i:5:p:858-864
    DOI: 10.1002/jae.2709
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    Replication

    This item is a replication of:
  • Ian Martin, 2017. "What is the Expected Return on the Market?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(1), pages 367-433.

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    1. Expected market returns: SVIX, realized volatility, and the role of dividends (Journal of Applied Econometrics 2019) in ReplicationWiki

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