Volatility spillovers and the price of risk: Evidence from the Swiss stock market

Christian Jochum ()
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Christian Jochum: Department of Economics , University of St. Gallen, Dufourstr. 48, CH-9000 St. Gallen, Switzerland

Empirical Economics, 1999, vol. 24, issue 2, 303-322

Abstract: This paper investigates the behavior of the risk premium on the Swiss stock market. The risk premium consists of two components, which are estimated separately: the amount of volatility and the unit price of risk. By estimating a bivariate GARCH-M model the volatility of the Swiss market is found to be strongly exposed to spillovers from the other major financial markets. To estimate the unit price of risk a Kalman filter procedure is employed, which allows for variability in this variable. Investors place a high price on risk, when the market is considered `expensive'.

Keywords: Volatility; spillovers; ·; risk; premium; ·; Kalman; filter (search for similar items in EconPapers)
JEL-codes: C22 G12 (search for similar items in EconPapers)
Date: 1999-05-11
Note: received: March 1998/final version received: July 1998
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Citations: View citations in EconPapers (11)

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