An Empirical Investigation of Continuous-Time Equity Return Models / Torben G. Andersen, Luca Benzoni, Jesper Lund.

Format:

Book

Author/Creator:

Andersen, Torben G.

Contributor:

National Bureau of Economic Research.

Benzoni, Luca.

Lund, Jesper.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8510.

NBER working paper series no. w8510

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

This paper extends the class of stochastic volatility diffusions for asset returns to encompass Poisson jumps of time-varying intensity. We find that any reasonably descriptive continuous-time model for equity-index returns must allow for discrete jumps as well as stochastic volatility with a pronounced negative relationship between return and volatility innovations. We also find that the dominant empirical characteristics of the return process appear to be priced by the option market. Our analysis indicates a general correspondence between the evidence extracted from daily equity-index returns and the stylized features of the corresponding options market prices.

Notes:

Print version record

October 2001.