02336cam a22003257 4500001000600000003000500006005001700011006001900028007001500047008004100062100002100103245015000124260006600274300005700340490005100397500001900448520093800467530006001405538007201465538003601537588002501573690008501598690008501683700001601768700002501784710004201809830008601851856003701937856003601974t0065NBER20200918035533.0m o d cr cnu||||||||200918s1988 mau fo 000 0 eng d1 aEngle, Robert F.10aAsset Pricing with a Factor Arch Covariance Structure:bEmpirical Estimates for Treasury Bills /cRobert F. Engle, Victor Ng, Michael Rothschild. aCambridge, Mass.bNational Bureau of Economic Researchc1988. a1 online resource:billustrations (black and white);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.0 aPrint version record 7aE - Macroeconomics and Monetary Economics2Journal of Economic Literature class. 7aC - Mathematical and Quantitative Methods2Journal of Economic Literature class.1 aNg, Victor.1 aRothschild, Michael.2 aNational Bureau of Economic Research. 0aTechnical Working Paper Series (National Bureau of Economic Research)vno. t0065.40uhttp://www.nber.org/papers/t006540uhttp://dx.doi.org/10.3386/t0065