The Shape of the Risk Premium: Evidence from a Semiparametric Generalized Autoregressive Conditional Heteroscedasticity Model

Oliver Linton and Benoit Perron ()

Journal of Business & Economic Statistics, 2003, vol. 21, issue 3, 354-67

Abstract: We examine the relationship between the risk premium on the Center for Research on Security Prices (CRSP) value-weighted index total return and its conditional variance. We propose a new semiparametric model in which the conditional variance process is parametric and the conditional mean is an arbitrary function of the conditional variance. For monthly CRSP value-weighted excess returns, the relationship between the two moments that we uncover is nonlinear and nonmonotonic.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:21:y:2003:i:3:p:354-67

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