Learning and Conditional Heteroscedasticity in Asset Returns

Bruce Mizrach ()
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Bruce Mizrach: Rutgers University

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: Despite the widespread use of the GARCH model, the specification of the heteroscedasticity is essentially ad hoc. This paper's contribution is to develop a model of asset pricing and learning where GARCH disturbances evolve naturally out of the decision problem of economic agents. An empirical example with the Italian-Lira German Deutschemark exchange rate supports the extended GARCH specification proposed in the paper.

Keywords: asset returns; GARCH; learning (search for similar items in EconPapers)
JEL-codes: C22 F31 G12 (search for similar items in EconPapers)
Date: 1996-07-24
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Citations: View citations in EconPapers (1)

Forthcoming in "Learning and ARCH Disturbances in Asset Returns," in Catherine Kyrtsou (ed.), Progress in Financial Markets Research, New York: Nova Science.

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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:199526

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