Realized variance jump risk predicts stock market returns, study finds.
The study looked at how sudden changes in stock market volatility affect stock returns. By analyzing data from the S&P 500 index, researchers found that these volatility jumps are linked to higher stock market returns. This relationship held true from 1998 to 2010, even when other factors were taken into account. The findings suggest that these volatility jumps can predict future stock market performance, independent of other risks like price jumps.