Linton, Oliver and Perron, Benoit (2000) The shape of the risk premium: evidence from a semiparametric GARCH model. Discussion paper, 514. Financial Markets Group, London School of Economics and Political Science, London, UK.
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Abstract
We examine the relationship between the risk premium on the S&P500 index total return and its conditional variance. We propose a new semiparametric model in which the conditional variance process is parametric, while the conditional mean is an arbitrary function of the conditional variance. For monthly S&P 500 excess returns, the relationship between the two moments that we uncover is nonlinear and nonmonotonic. Moreover, we find considerable persistence in the conditional variance as well as a leverage effect as documented by others.
| Item Type: | Monograph (Discussion Paper) |
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| Official URL: | http://fmg.lse.ac.uk |
| Additional Information: | © 2000 The Authors |
| Uncontrolled Keywords: | ARCH, Asset Pricing, Backfitting, Fourier Series, Kernel, Risk Premium |
| Library of Congress subject classification: | H Social Sciences > HB Economic Theory H Social Sciences > HJ Public Finance |
| Journal of Economic Literature Classification System: | G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C14 - Semiparametric and Nonparametric Methods C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C13 - Estimation |
| Sets: | Research centres and groups > Financial Markets Group (FMG) Collections > Economists Online |
| Rights: | http://www.lse.ac.uk/library/rights/LSERO.htm |
| Identification Number: | 514 |
| URL: | http://eprints.lse.ac.uk/24769/ |
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