Modeling Asset Returns: A Comparison of Theoretical and Empirical Models

Arbeitspapier

This paper presents and compares several time-series models for returns of broadbased stock indices. These models nest a nonlinear asymmetric GARCH (NGARCH) model as a special case. Some of these models are empirically motivated ad-hoc specifications others are derived from a representative investor economy with HARA-utility and some are behavioral, i.e. are based on recent findings in behavioral finance. To compare these models we use the inflation adjusted MSCI total return indices of 5 large economies, USA, United Kingdom, Germany, France and Japan. The empirical results show that although the pure NGARCH model performs well, the estimation for two indices could be significantly improved by an extension which follows from the representative investor model with HARA-utility.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 04-19

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Asset Pricing; Trading Volume; Bond Interest Rates ; International Financial Markets
• Subject: asset pricing ; HARA-utility function ; behavioral finance ; NGARCHin-mean ; Kapitalertrag ; Börsenkurs ; Aktienindex ; Anlageverhalten ; ARCH-Modell ; Nichtlineares Verfahren ; Vergleich ; Schätzung ; Vereinigte Staaten ; Grossbritannien ; Deutschland ; Frankreich ; Japan

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lüders, Erik ; Schröder, Michael
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/24029
• Last update: 10.03.2025, 11:41 AM CET