Expected stock return and mixed frequency variance risk premium data

Motivated by the research of the variance risk premium (VRP) and MIDAS model, we employ the VRP with different maturities and the ADL-MIDAS regression model to forecast the expected stock return in Standard & Poor 500 market. The VRP is defined as the difference between the realized variance and the implied variance of the options. By using Standard & Poor 500 index options, we provide the empirical tests of the forecasting performance provided by the VRP with different maturities to the expected stock returns in the Standard & Poor 500 stock index market. Based on the empirical results, we know the VRP with 1-month and 2-month maturities can provide the best out-of-sample forecast.