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The time-varying GARCH-in-mean model

Gustavo Fruet Dias

Economics Letters, 2017, vol. 157, issue C, 129-132

Abstract: I propose an estimation strategy for the stochastic time-varying risk premium parameter in the context of a time-varying GARCH-in-mean (TVGARCH-in-mean) model. A Monte Carlo study shows that the proposed algorithm has good finite sample properties. Using monthly excess returns on the CRSP index, I document that the risk premium parameter is indeed time-varying and shows high degree of persistence.

Keywords: Risk-return tradeoff; Time-varying coefficients; Iterative estimators; GARCH-type models (search for similar items in EconPapers)
JEL-codes: C13 C15 C22 G12 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ecolet:v:157:y:2017:i:c:p:129-132