Volatility Risk Premium, Return Predictability, and ESG Sentiment: Evidence from China’s Spots and Options’ Markets
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 real...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Hindawi-Wiley
2022-01-01
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| Series: | Complexity |
| Online Access: | http://dx.doi.org/10.1155/2022/6813797 |
| _version_ | 1798030457356419072 |
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| author | Zhaohua Liu Susheng Wang Siyi Liu Haixu Yu He Wang |
| author_facet | Zhaohua Liu Susheng Wang Siyi Liu Haixu Yu He Wang |
| author_sort | Zhaohua Liu |
| collection | DOAJ |
| description | 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. |
| first_indexed | 2024-04-11T19:40:44Z |
| format | Article |
| id | doaj.art-6c8fb73b169b43e093df00fe02745c1f |
| institution | Directory Open Access Journal |
| issn | 1099-0526 |
| language | English |
| last_indexed | 2024-04-11T19:40:44Z |
| publishDate | 2022-01-01 |
| publisher | Hindawi-Wiley |
| record_format | Article |
| series | Complexity |
| spelling | doaj.art-6c8fb73b169b43e093df00fe02745c1f2022-12-22T04:06:43ZengHindawi-WileyComplexity1099-05262022-01-01202210.1155/2022/6813797Volatility Risk Premium, Return Predictability, and ESG Sentiment: Evidence from China’s Spots and Options’ MarketsZhaohua Liu0Susheng Wang1Siyi Liu2Haixu Yu3He Wang4School of BusinessSchool of BusinessSchool of BusinessSchool of BusinessSchool of BusinessThis 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.http://dx.doi.org/10.1155/2022/6813797 |
| spellingShingle | Zhaohua Liu Susheng Wang Siyi Liu Haixu Yu He Wang Volatility Risk Premium, Return Predictability, and ESG Sentiment: Evidence from China’s Spots and Options’ Markets Complexity |
| title | Volatility Risk Premium, Return Predictability, and ESG Sentiment: Evidence from China’s Spots and Options’ Markets |
| title_full | Volatility Risk Premium, Return Predictability, and ESG Sentiment: Evidence from China’s Spots and Options’ Markets |
| title_fullStr | Volatility Risk Premium, Return Predictability, and ESG Sentiment: Evidence from China’s Spots and Options’ Markets |
| title_full_unstemmed | Volatility Risk Premium, Return Predictability, and ESG Sentiment: Evidence from China’s Spots and Options’ Markets |
| title_short | Volatility Risk Premium, Return Predictability, and ESG Sentiment: Evidence from China’s Spots and Options’ Markets |
| title_sort | volatility risk premium return predictability and esg sentiment evidence from china s spots and options markets |
| url | http://dx.doi.org/10.1155/2022/6813797 |
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