Risk-neutral moments and return predictability: International evidence

This paper documents risk-neutral moments of returns on 29 country-/region-specific ETFs to provide international uncertainty proxies for as many locations as possible. Our evidence shows these ETFs can generally reflect idiosyncratic information from international markets, but the predictive abilities of risk-neutral moments are heterogeneous among them. The evidence from panel prediction shows that the risk-neutral standard deviation (VOL) can positively predict, but skewness (SKEW) and excess kurtosis (KURT) negatively predict, the future excess returns in time-series analysis. Moreover, results from the post-ranking performance show that the ETFs with low SKEW on average earn an extra 4.55% annualized monthly excess return, compared with those with high SKEW.