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. (Submitted)
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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 |
| Divisions: | Financial Markets Group |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HJ Public Finance |
| JEL classification: | 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 Collections > LSE Financial Markets Group (FMG) Working Papers |
| Date Deposited: | 06 Aug 2009 14:24 |
| Last Modified: | 10 Dec 2020 00:49 |
| URI: | http://eprints.lse.ac.uk/id/eprint/24769 |
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