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Journal Article

Alternative Models for the Conditional Heteroscedasticity of Stock Returns

Dongcheol Kim and Stanley J. Kon
The Journal of Business
Vol. 67, No. 4 (Oct., 1994), pp. 563-598
Stable URL: http://www.jstor.org/stable/2353323
Page Count: 36
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Alternative Models for the Conditional Heteroscedasticity of Stock Returns
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Abstract

This article compares econometric model specifications that have been proposed to explain the commonly observed characteristics of the unconditional distribution of daily stock returns. The empirical results indicate that the most likely ranking is (1) intertemporal dependence models, (2) Student t, (3) generalized mixture-of-normal distributions, (4) Poisson jump, and (5) the stationary normal. Among the intertemporal dependence models for conditional heteroscedasticity, those with a leverage (or asymmetry) effect are superior. The Glosten, Jagannathan, and Runkle specification is the most descriptive for individual stocks, while Nelson's exponential model is the most likely for stock indexes.

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