Journal article
U.S. stock market crash risk, 1926-2010
Journal of financial economics, Vol.105(2), pp.229-259
08/01/2012
DOI: 10.1016/j.jfineco.2012.03.004
Abstract
This paper examines how well alternate time-changed Levy processes capture stochastic volatility and the substantial outliers observed in U.S. stock market returns over the past 85 years. The autocorrelation of daily stock market returns varies substantially over time, necessitating an additional state variable when analyzing historical data. I estimate various one- and two-factor stochastic volatility/Levy models with time-varying autocorrelation via extensions of the Bates (2006) methodology that provide filtered daily estimates of volatility and autocorrelation. The paper explores option pricing implications, including for the Volatility Index (VIX) during the recent financial crisis. (C) 2012 Elsevier B.V. All rights reserved.
Details
- Title: Subtitle
- U.S. stock market crash risk, 1926-2010
- Creators
- David S. Bates - Univ Iowa, Iowa City, IA 52242 USA
- Resource Type
- Journal article
- Publication Details
- Journal of financial economics, Vol.105(2), pp.229-259
- Publisher
- Elsevier
- DOI
- 10.1016/j.jfineco.2012.03.004
- ISSN
- 0304-405X
- eISSN
- 1879-2774
- Number of pages
- 31
- Language
- English
- Date published
- 08/01/2012
- Academic Unit
- Finance
- Record Identifier
- 9984380558102771
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