Alternative Models for Conditional Stock Volatility
Adrian R. Pagan
University of Rochester, Rochester, NY 14627
and Australian National University
G. William Schwert
University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research
Journal of Econometrics, 45 (July 1990) 267-290
This paper compares several statistical models for monthly stock return volatility. The focus is on U.S. data
from 1834-1925 because the post-1926 data have been analyzed in more detail by others. Also, the Great
Depression had levels of stock volatility that are inconsistent with stationary models for conditional
heteroskedasticity. We show the importance of nonlinearities in stock return behavior that are not captured by
conventional ARCH or GARCH models. We also show the nonstationarity of stock volatility.
Key words: Volatility, Heteroskedasticity, Stock Market, ARCH, GARCH, Nonparametric, Kernel, Fourier
JEL Classifications: G14, C22
Cited 56 times in the SSCI through April 1996
© Copyright 1990, Elsevier
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