Crash Risk Matters: An Option‐Implied Approach to the Expected Market Return
提出一个下限模型，利用崩盘风险与风险中性方差的联合效应预测市场对数回报，发现崩盘风险在危机和非危机时期对回报有显著预测力，且在风险厌恶高时表现更优。
ABSTRACT This study introduces a lower bound that integrates the market's simple return risk‐neutral variance () and a combination of log‐return moments () to predict market log returns. A distinctive feature of the model is that the ratio of to captures crash risk, and the lower bound of log returns depends on the joint effect of crash risk and risk‐neutral variance. Our in‐sample analysis shows that crash risk exhibits significant predictive power for market returns, and its marginal effect differs markedly between crisis and noncrisis periods. In out‐of‐sample testing, we argue that crash risk outperforms several benchmarks in return prediction, while the joint effects of crash risk and variance risk achieves higher accuracy in forecasting crash events. We further demonstrate that our model delivers superior performance when the risk aversion is high, particularly during periods of crises.