Stochastic Volatility in General Equilibrium
Journal Article (Journal Article)
The connections between stock market volatility and returns are studied within the context of a general equilibrium framework. The framework rules out a priori any purely statistical relationship between volatility and returns by imposing uncorrelated innovations. The main model generates a two-factor structure for stock market volatility along with time-varying risk premiums on consumption and volatility risk. It also generates endogenously a dynamic leverage effect (volatility asymmetry), the sign of which depends upon the magnitudes of the risk aversion and the intertemporal elasticity of substitution parameters.
Full Text
Duke Authors
Cited Authors
- Tauchen, G
Published Date
- December 1, 2011
Published In
Volume / Issue
- 1 / 4
Start / End Page
- 707 - 731
Electronic International Standard Serial Number (EISSN)
- 2010-1406
International Standard Serial Number (ISSN)
- 2010-1392
Digital Object Identifier (DOI)
- 10.1142/S2010139211000237
Citation Source
- Scopus