Download This PaperThe Time-Varying Garch-in-Mean Model
17 Pages Posted: 26 Apr 2017
Date Written: April 25, 2017
Abstract
I introduce the time-varying GARCH-in-mean (TVGARCH-in-mean) model and propose an estimation strategy for the stochastic time-varying risk premium parameter. A Monte Carlo study shows that the proposed algorithm has good finite sample properties. Using monthly excess returns on the CRSP index, I document that the risk premium parameter is indeed time-varying and shows high degree of persistence.
Keywords: risk premium, time-varying coefficients, iterative estimators, risk-return tradeoff, GARCH-type models
JEL Classification: C13, C15, C18, C22, G12
Suggested Citation: Suggested Citation
Fruet Dias, Gustavo, The Time-Varying Garch-in-Mean Model (April 25, 2017). Available at SSRN: https://ssrn.com/abstract=2958132 or http://dx.doi.org/10.2139/ssrn.2958132
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