The Stochastic Volatility in Mean model : Empirical evidence from international stock markets

@inproceedings{Koopman2000TheSV,
  title={The Stochastic Volatility in Mean model : Empirical evidence from international stock markets},
  author={Siem Jan Koopman and Eugenie Hol Uspensky},
  year={2000}
}
In this paper we present an exact maximum likelihood treatment for the estimation of a Stochastic Volatility in Mean (SVM) model based on Monte Carlo simulation methods. The SVM model incorporates the unobserved volatility as an explanatory variable in the mean equation. The same extension is developed elsewhere for Autoregressive Conditional Heteroskedastic (ARCH) models, known as the ARCH in Mean (ARCH-M) model. The estimation of ARCH models is relatively easy compared with that of the… CONTINUE READING
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