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3 years ago

New research reveals how volatility can predict future market returns!

SSRN Electronic Journal
Information-Driven Volatility
Hengjie Ai, Leyla Jianyu Han, Lai Xu

Paper Summary

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The article discusses how volatility in the past can predict future returns, even though theory suggests the opposite. The researchers show that information-driven volatility can lead to this negative relationship. They create a model that explains why past volatility can predict future returns, solving puzzles in asset pricing related to volatility.