Learning and Conditional Heteroscedasticity in Asset Returns

Despite the widespread use of the GARCH model, the specification of the heteroscedasticity is essentially ad hoc. This paper's contribution is to develop a model of asset pricing and learning where GARCH disturbances evolve naturally out of the decision problem of economic agents. An empirical example with the Italian-Lira German Deutschemark exchange rate supports the extended GARCH specification proposed in the paper.

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Year of publication:	1996-07-24
Authors:	Mizrach, Bruce
Institutions:	Department of Economics, Rutgers University-New Brunswick
Subject:	asset returns \| GARCH \| learning

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Series:	Departmental Working Papers.
Type of publication:	Book / Working Paper
Notes:	Forthcoming in "Learning and ARCH Disturbances in Asset Returns," in Catherine Kyrtsou (ed.), Progress in Financial Markets Research, New York: Nova Science.
Classification:	C22 - Time-Series Models ; F31 - Foreign Exchange ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005800361