Long-term equity anticipation securities and stock market volatility dynamics
Recent empirical findings suggest that the long-run dependence in U.S. stock market volatility is best described by a slowly mean-reverting fractionally integrated process. The present study complements this existing time-series-based evidence by comparing the risk-neutralized option pricing distributions from various ARCH-type formulations. Utilizing a panel data set consisting of newly created exchange traded long-term equity anticipation securities, or leaps, on the Standard and Poor's 500 stock market index with maturity times ranging up to three years, we find that the degree of mean reversion in the volatility process implicit in these prices is best described by a Fractionally Integrated EGARCH (FIEGARCH) model. © 1999 Elsevier Science S.A. All rights reserved.
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- Econometrics
- 4905 Statistics
- 3802 Econometrics
- 3801 Applied economics
- 1403 Econometrics
- 1402 Applied Economics
- 0104 Statistics
Citation
Published In
DOI
ISSN
Publication Date
Volume
Issue
Start / End Page
Related Subject Headings
- Econometrics
- 4905 Statistics
- 3802 Econometrics
- 3801 Applied economics
- 1403 Econometrics
- 1402 Applied Economics
- 0104 Statistics