A Markov Model of Heteroskedasticity, Risk, and Learning in the Stock Market*

نویسندگان

  • Christopher M. TURNER
  • Richard STARTZ
  • Charles R. NELSON
چکیده

We examine a variety of models in which the variance of a portfolio’s excess return depends on a state variable generated by a first-order Markov process. A model in which the state is known to economic agents is estimated. It suggests that the mean excess return moves inversely with the level of risk. We then estimate a model in which agents are uncertain of the state. The estimates indicate that agents are consistently surprised by high-variance periods. so there is a negative correlation between movements in volatility and in excess returns.

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تاریخ انتشار 2001