Guidolin, Massimo; Ono, Sadayuki - Federal Reserve Bank of St. Louis - 2005
dynamic linkages between financial markets and the macroeconomy have been stable over time. We show that the four-state model … mean excess equity returns tend to be
low in the high-risk (volatility) period, and viceversa. Allowing for switching in …-state GARCH(1,1) specification and that the high-volatility state is likely to occur in recession periods.
Guidolin and Timmermann …