Federal ID: 91-6001537
ISSN: 0022-1090 (Print) | 1756-6916 (Online)
Return Extrapolation and Volatility Expectations
Tarun Chordia, Tse-Chun Lin, and Vincent Xiang ♦ This paper provides the first comprehensive evidence that the return extrapolation behavior of investors leads to biases in the expectations of volatility. Lower past returns are associated with higher expectations of volatility…