Asymptotically optimal smoothing with ARCH models
Article Abstract:
Nelson (1992) and Nelson and Foster (1994) had demonstrated that a misspecified ARCH model consistently derives the unobserved volatility process through information from the lagged residuals. The efficient derivation of a volatility process through information from lagged and led residuals is demonstrated. The optimal filtering results of Nelson and Foster and Nelson are expanded to filtering error with a random initial condition and to smoothing.
Publication Name: Econometrica
Subject: Mathematics
ISSN: 0012-9682
Year: 1996
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Idiosyncratic volatility, stock market volatility and expected stock returns
Article Abstract:
The value-weighted idiosyncratic stock volatility and aggregate stock market volatility jointly exhibit strong predictive power for excess stock market returns. The stock market risk-return relation is found to be positive as stipulated by the capital asset pricing model however idiosyncratic volatility is negatively related to future stock market returns.
Publication Name: Journal of Business & Economic Statistics
Subject: Mathematics
ISSN: 0735-0015
Year: 2006
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Multivariate stochastic volatility via Wishart processes
Article Abstract:
A multivariate stochastic volatility framework for modeling financial data is presented, in which time-varying covariance matrices are driven by Wishart processes.
Publication Name: Journal of Business & Economic Statistics
Subject: Mathematics
ISSN: 0735-0015
Year: 2006
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