Alternative Models For Conditional Stock Volatility
NBER Working Paper No. 2955 (Also Reprint No. r1462)
This paper compares several statistical models for monthly stock return volatility. The focus is on U.S. data from 1834-19:5 because the post-1926 data have been analyzed in more detail by others. Also, the Great Depression had levels of stock volatility that are inconsistent with stationary models for conditional heteroskedasticity, We show the importance of nonlinearities in stock return behavior that are not captured by conventional ARCH or GARCH models. We also show the nonstationariry of stock volatility, even over the 1834-1925 period.
Published: Journal of Econometrics, Vol. 45, pp. 267-290, (1990).