Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If You Use a Screen Reader

This content is available through Read Online (Free) program, which relies on page scans. 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.

Conditional Heteroskedasticity in Asset Returns: A New Approach

Daniel B. Nelson
Econometrica
Vol. 59, No. 2 (Mar., 1991), pp. 347-370
Published by: The Econometric Society
DOI: 10.2307/2938260
Stable URL: http://www.jstor.org/stable/2938260
Page Count: 24
  • Read Online (Free)
  • Download ($10.00)
  • Subscribe ($19.50)
  • Cite this Item
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.
Conditional Heteroskedasticity in Asset Returns: A New Approach
Preview not available

Abstract

GARCH models have been applied in modelling the relation between conditional variance and asset risk premia. These models, however, have at least three major drawbacks in asset pricing applications: (i) Researchers beginning with Black (1976) have found a negative correlation between current returns and future returns volatility. GARCH models rule this out by assumption. (ii) GARCH models impose parameter restrictions that are often violated by estimated coefficients and that may unduly restrict the dynamics of the conditional variance process. (iii) Interpreting whether shocks to conditional variance "persist" or not is difficult in GARCH models, because the usual norms measuring persistence often do not agree. A new form of ARCH is proposed that meets these objections. The method is used to estimate a model of the risk premium on the CRSP Value-Weighted Market Index from 1962 to 1987.

Page Thumbnails

  • Thumbnail: Page 
347
    347
  • Thumbnail: Page 
348
    348
  • Thumbnail: Page 
349
    349
  • Thumbnail: Page 
350
    350
  • Thumbnail: Page 
351
    351
  • Thumbnail: Page 
352
    352
  • Thumbnail: Page 
353
    353
  • Thumbnail: Page 
354
    354
  • Thumbnail: Page 
355
    355
  • Thumbnail: Page 
356
    356
  • Thumbnail: Page 
357
    357
  • Thumbnail: Page 
358
    358
  • Thumbnail: Page 
359
    359
  • Thumbnail: Page 
360
    360
  • Thumbnail: Page 
361
    361
  • Thumbnail: Page 
362
    362
  • Thumbnail: Page 
363
    363
  • Thumbnail: Page 
364
    364
  • Thumbnail: Page 
365
    365
  • Thumbnail: Page 
366
    366
  • Thumbnail: Page 
367
    367
  • Thumbnail: Page 
368
    368
  • Thumbnail: Page 
369
    369
  • Thumbnail: Page 
370
    370