PT - JOURNAL ARTICLE AU - William Fallon AU - James Park TI - An Asset Class Characterization of the U.S. Equity Index Volatility Risk Premium AID - 10.3905/jpm.2016.43.1.072 DP - 2016 Oct 31 TA - The Journal of Portfolio Management PG - 72--84 VI - 43 IP - 1 4099 - https://pm-research.com/content/43/1/72.short 4100 - https://pm-research.com/content/43/1/72.full AB - The authors use a novel 32-year return series to study the risk, return, and predictability of a strategy that sells one-month S&P 500 variance swaps with fixed ex-ante tail risk. They find that unconditional short exposure in their sample is characterized primarily by two features: (1) a very high Sharpe ratio exceeding 1.2 and (2) a severe but infrequent crash risk. From a forecasting perspective, the authors find a generally lower premium following market sell-offs and crashes. However, they fail to find significant evidence linking returns to the level of either implied or realized volatility.TOPIC: Derivatives