02002cam a22002537 4500001000600000003000500006005001700011008004100028100002100069245017300090260006600263490005100329500001900380520093800399530006101337538007201398538003601470700001601506700002501522710004201547830008601589856003701675856003601712t0065NBER20170424003712.0170424s1988 mau||||fs|||| 000 0 eng d1 aEngle, Robert F.10aAsset Pricing with a Factor Arch Covariance Structureh[electronic resource]:bEmpirical Estimates for Treasury Bills /cRobert F. Engle, Victor Ng, Michael Rothschild. aCambridge, Mass.bNational Bureau of Economic Researchc1988.1 aNBER technical working paper seriesvno. t0065 aNovember 1988.3 aAsset pricing relations are developed for a vector of assets with a time varying covariance structure. Assuming that the eigenvectors are constant but the eigenvalues changing, both the Capital Asset Pricing Model and the Arbitrage Pricing Theory suggest the same testable implication: the time varying part of risk premia are proportional to the time varying eigenvalues. Specifying the eigenvalues as general ARCH processes. the model is a multivariate Factor ARCH model. Univariate portfolios corresponding to the eigenvectors will have (time varying) risk premia proportional to their own (time varying) variance and can be estimated using the GARCH-M model. This structure is applied to monthly treasury bills from two to twelve months maturity and the value weighted NYSE returns index. The bills appear to have a single factor in the variance process and this factor is influenced or "caused in variance" by the stock returns. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.1 aNg, Victor.1 aRothschild, Michael.2 aNational Bureau of Economic Research. 0aTechnical Working Paper Series (National Bureau of Economic Research)vno. t0065.4 uhttp://www.nber.org/papers/t006541uhttp://dx.doi.org/10.3386/t0065