Volatility Feedback and Risk Premium in GARCH Models with Generalized Hyperbolic Distributions

Minxian Yang

Studies in Nonlinear Dynamics & Econometrics, 2011, vol. 15, issue 3, 21

Abstract: The mixture structure of the generalized hyperbolic distribution of Barndorff-Nielsen (1997) is explored to quantify the contemporaneous correlation between return and volatility and to identify the effects of volatility feedback and risk premium within GARCH models. The statistical analysis of the excess returns based on the CRSP value-weighted portfolio index supports both volatility feedback and risk premium theories.

Date: 2011
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DOI: 10.2202/1558-3708.1820

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