Optimism and the Variance Risk Premium
“Out-of-sample investment strategies that jointly employ both VRP and optimism generate large Sharpe ratios and abnormal returns.”
AssetEquities
StrategyVolatility risk premiummachine learning
ClaimSharpe ratioalpha
InputsOptions-implied
Also stated: out-of-sample test
Missing from abstract: benchmark, costs, multiple testing, universe
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The paper's neighbourhoodVolatility risk premium by year
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| Similar papers | citation | same method | same asset | same authors | |
|---|---|---|---|---|---|
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| Does Relative Options Activity Predict the Variance Risk Premium? A Cross-sectional Test of a Martingale Restriction in U.S. Equity Options by Tucker | 2026 | ||||
| Trading the Volatility Risk Premium on Nifty 50: Strategy Backtest with Realistic Frictions by Pillai | 2026 |