Ebell, Monique C. - 2001 - First version: December 4, 1999, [This version:] April 26, 2001
During recessions, many macroeconomic variables display higher levels of volatility. We show how introducing an AR(1)-ARCH(1) driving process into the canonical Lucas consumption CAPM framework can account for the empirically observed greater volatility of asset returns during recessions. In...