The Shape of the Risk Premium: Evidence from a Semiparametric GARCH Model

Benoit Perron () and Oliver Linton

FMG Discussion Papers from Financial Markets Group

Abstract: We examine the relationship between the risk premium on the S&P500 index total return and its conditional variance. We propose a new semiparametric model in which the conditional variance process is parametric, while the conditional mean is an arbitrary function of the conditional variance. For monthly S&P 500 excess returns, the relationship between the two moments that we uncover is nonlinear and nonmonotonic. Moreover, we find considerable persistence in the conditional variance as well as a leverage effect as documented by others.

Date: 2004-09
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmgdps/dp514.pdf (application/pdf)

Related works:
Working Paper: The shape of the risk premium: evidence from a semiparametric GARCH model (2000)
Working Paper: The Shape of the Risk Premium: Evidence from a Semiparametric Garch Model (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fmg:fmgdps:dp514

Access Statistics for this paper

More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration ().