A Model of Return Volatility with Application to Estimating Relative Risk Aversion

A Model of Return Volatility with Application to Estimating Relative Risk Aversion We estimate a monthly return volatility model that allows for the abrupt changes in volatility often observed in returns data. Using this model we are able to identify key months likely to correspond to draws from a high volatility regime. Using our model in conjunction with Merton's (1980) model relating expected risk premia to risk we obtain reasonable estimates of the coefficient of relative risk aversion. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

A Model of Return Volatility with Application to Estimating Relative Risk Aversion

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1999 by Kluwer Academic Publishers
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1023/A:1008314430760
Publisher site
See Article on Publisher Site

Abstract

We estimate a monthly return volatility model that allows for the abrupt changes in volatility often observed in returns data. Using this model we are able to identify key months likely to correspond to draws from a high volatility regime. Using our model in conjunction with Merton's (1980) model relating expected risk premia to risk we obtain reasonable estimates of the coefficient of relative risk aversion.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Sep 30, 2004

References

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