NBER Working Papers and Publications
|April 1991||Measuring and Testing the Impact of News on Volatility|
with Robert F. Engle: w3681
This paper introduces the News Impact Curve to measure how new information is incorporated into volatility estimates. A variety of new and existing ARCH models are compared and estimated with daily Japanese stock return data to determine the shape of the News Impact Curve. New diagnostic tests are presented which emphasize the asymmetry of the volatility response to news. A partially non-parametric ARCH model is introduced to allow the data to estimate this shape. A comparison of this model with the existing models suggests that the best models are one by Glosten Jaganathan and Runkle (GJR) and Nelson's EGARCE. Similar results hold on a pre-crash sample period but are less strong.
Published: Journal of Finance, 1993, vol. 48, issue 5, pages 1749-78 citation courtesy of
|Time-Varying Volatility and the Dynamic Behavior of the Term Structure|
with Robert F. Engle: w3682
In this paper, we consider a framework with which the cross sectional and time series behavior of the yield curve can be studied simultaneously. We examine the relationship between the yield curve and the time-varying conditional volatility of the Treasury bill market. We demonstrate that differently shaped yield curves can result given different combinations of volatility and expectations about future spot rates. Moreover, adjusting the forward rate for the volatility related liquidity premium can improve its performance as a predictor of future spot rates at least for the period from August 1964 to August 1979.
Published: Journal of Money, Credit and Banking, 1993, vol. 25, issue 3, pages 336-49. citation courtesy of
|November 1988||Asset Pricing with a Factor Arch Covariance Structure: Empirical Estimates for Treasury Bills|
with Robert F. Engle, Michael Rothschild: t0065
Asset 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 bil...
Published: Journal of Econometrics, Vol. 45, No. 1/2, pp. 213-237, (July/August 1990).