We propose a novel method to estimate dynamic equilibrium models with stochastic volatility. First, we characterize the … exploits the profusion of shocks in stochastic volatility models, is versatile and computationally tractable even in large … methods to estimate a business cycle model of the U.S. economy with both stochastic volatility and parameter drifting in …

findings of the empirical literature: excess volatility of the market price compared to the asset's fundamental value, serially … correlated volatility, contemporaneous volume-volatility correlation, and excess kurtosis of price changes. We implement a …

fit the model to US data, allowing the volatility of cross-sectional idiosyncratic uncertainty to fluctuate over time. We … refer to this measure of volatility as 'risk'. We find that fluctuations in risk are the most important shock driving the …