Decomposing long vol: A poor hedge even beyond it's expected overpricing

In Vol Premium [Partial] Justification I refer to my argument that "vol should be overpriced". That is because it is not correlated with the realization of systematic risk. The math and concepts behind that idea are further explained in my posts:

  • You Don't See The Whole Picture [The Sun/Rain Example] (Link)
  • Why You Do Not Get Paid For Diversifiable Risk (Link)

Colin Bennett explains how this relates to volatility. The risk premium embedded in options is partially justified because it is positively correlated with systematic risk. He makes the case that even adjusting for that there is still in excess premia. In chapter 3, he provides a way to decompose the premia into what's fair and what's excess.