An empirical investigation of continuous-time equity return models

Journal of Finance

Volumn 57, Issue 3, 2002, Pages 1239-1284

  Andersen, Torben G ^a   Benzoni, Luca ^b   Lund, Jesper ^c  

^a NORTHWESTERN UNIVERSITY   (United States)

^b UNIVERSITY OF MINNESOTA   (United States)

^c Nykredit Bank ^*  (Denmark)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0012692686     PISSN: 00221082     EISSN: None     Source Type: Journal    
DOI: 10.1111/1540-6261.00460     Document Type: Article

References (88)

1. Aït-Sahalia, Yacine, 1996, Nonparametric pricing of interest rate derivative securities, Econometrica 64, 527-560.
2. Akgiray, Vedat, and Geoffrey Booth, 1986, Stock price processes with discontinuous time paths: An empirical examination, The Financial Review 21, 163-184.
3. Andersen, Torben G., Tim Bollerslev, Francis X. Diebold, and Paul Labys, 2001, Modeling and forecasting realized volatility, Working paper #276, Northwestern University.
4. Andersen, Torben G., Hyung-Jin Chung, and Bent E. Sørensen, 1999, Efficient method of moments estimation of a stochastic volatility model: A Monte Carlo study, Journal of Econometrics 91, 61-87.
5. Andersen, Torben G., and Jesper Lund, 1996, Stochastic volatility and mean drift in the short term interest rate diffusion: Sources of steepness, level and curvature in the yield curve, Working paper #214, Northwestern University.
6. Andersen, Torben G., and Jesper Lund, 1997, Estimating continuous-time stochastic volatility models of the short term interest rate, Journal of Econometrics 77, 343-377.
7. Backus, David K., Silverio Foresi, Kai Li, and Liuren Wu, 1997, Accounting for biases in Black-Scholes, Working paper, New York University.
8. Backus, David K., and Allan W. Gregory, 1993, Theoretical relations between risk premiums and conditional variances, Journal of Business and Economic Statistics 11, 177-185.
9. Bakshi, Gurdip, Charles Cao, and Zhiwu Chen, 1997, Empirical performance of alternative option pricing models, Journal of Finance 52, 2003-2049.
10. Bakshi, Gurdip, Charles Cao, and Zhiwu Chen, 2000, Pricing and hedging long-term options, Journal of Econometrics 94, 277-318.
11. Bakshi, Gurdip, and Nikunj Kapadia, 2001, Delta-hedged gains and the negative market volatility risk premium, The Review of Financial Studies, forthcoming.
12. Bakshi, Gurdip, and Dilip Madan, 2000, Spanning and derivative-security valuation, Journal of Financial Economics 55, 205-238.
13. Ball, Clifford A., and Walter N. Torous, 1985, On jumps in common stock prices and their impact on call option pricing, Journal of Finance 40, 155-173.
14. Bandi, Federico M., and Thong Nguyen, 2000, On the functional estimation of jump-diffusion processes, Working paper, University of Chicago and Yale University.
15. Bandi, Federico M., and Peter C. B. Phillips, 1998, Econometric estimation of diffusion models, Working paper, Cowles Foundation, Yale University.
16. Bates, David S., 1996a, Jumps and stochastic volatility: Exchange rate processes implicit in Deutsche mark options, The Review of Financial Studies 9, 69-107.
17. Bates, David S., 1996b, Testing option pricing models, in G. S. Maddala and C. R. Rao, eds.: Handbook of Statistics, vol. 14, Statistical Methods in Finance (North-Holland, Amsterdam).
18. Bates, David S., 2000, Post-'87 crash fears in S&P 500 futures options, Journal of Econometrics 94, 181-238.
19. Benzoni, Luca, 1998, Pricing options under stochastic volatility: An econometric analysis, Working paper, University of Minnesota.
20. Brenner, Menachem, and Young H. Eom, 1997, No-arbitrage option pricing: New evidence on the validity of the Martingale property, Working paper, New York University.
21. Carrasco, Marine, Mikhail Chernov, Eric Ghysels, and Jean-Pierre Florens, 2001, Estimating diffusions with a continuum of moment conditions, Working paper, University of North Carolina.
22. Chacko, George, and Luis M. Viceira, 1999, Spectral GMM estimation of continuous-time processes, Working paper, Harvard University.
23. Chernov, Mikhail, A. Ronald Gallant, Eric Ghysels, and George Tauchen, 1999, A new class of stochastic volatility models with jumps: Theory and estimation, Working paper, Penn State University, University of North Carolina, Duke University.
24. Chernov, Mikhail, A. Ronald Gallant, Eric Ghysels, and George Tauchen, 2000, Alternative models for stock price dynamics, Working paper, Columbia University, University of North Carolina, Duke University.
25. Chernov, Mikhail, and Eric Ghysels, 2000, A study towards a unified approach to the joint estimation of objective and risk neutral measures for the purpose of options valuation, Journal of Financial Economics 56, 407-458.
26. Conley, Timothy G., Lars P. Hansen, Erzo G. J. Luttmer, and José A. Scheinkman, 1997, Short-term interest rates as subordinated diffusions, The Review of Financial Studies 10, 525-577.
27. Coval, Joshua D., and Tyler Shumway, 2001, Expected option returns, Journal of Finance 56, 983-1009.
28. Cox, John C., Jonathan E. Ingersoll, Jr., and Stephen A. Ross, 1985, A theory of the term structure of interest rates, Econometrica 53, 385-407.
29. Das, Sanjiv R., 2002, The surprise element: Jumps in interest rates, Journal of Econometrics 106, 27-65.
30. Das, Sanjiv R., and Silverio Foresi, 1996, Exact solutions for bond and option prices with systematic jump risk, Review of Derivatives Research 1, 7-24.
31. Das, Sanjiv R., and Rangarajan K. Sundaram, 1999, Of smiles and smirks: A term-structure perspective, Journal of Financial and Quantitative Analysis 34, 211-239.
32. Das, Sanjiv R., and Raman Uppal, 1998, International portfolio choice with systemic risk, Working paper, Harvard Business School and MIT.
33. Duffie, Darrell, Jun Pan, and Kenneth J. Singleton, 2000, Transform analysis and asset pricing for affine jump diffusions, Econometrica 68, 1343-1376.
34. Duffie, Darrell, and Kenneth J. Singleton, 1993, Simulated moments estimation of Markov models of asset prices, Econometrica 61, 929-952.
35. Dumas, Bernard, Jeff Fleming, and Robert E. Whaley, 1998, Implied volatility functions: Empirical tests, Journal of Finance 53, 2059-2106.
36. Elerian, Ola, Siddhartha Chib, and Neil Shepherd, 2001, Likelihood inference for discretely observed non-linear diffusions, Econometrica 69, 959-994.
37. Eraker, Bjørn, 2001a, Do stock prices and volatility jump? Reconciling evidence from spot and option prices, Working paper, Duke University.
38. Eraker, Bjørn, 2001b, MCMC analysis of diffusion models with application to finance, Journal of Business and Economic Statistics 19, 177-191.
39. Eraker, Bjørn, Michael S. Johannes, and Nicholas G. Polson, 2001, The impact of jumps on volatility and returns, Journal of Finance, forthcoming.
40. Gallant, A. Ronald, David A. Hsieh, and George Tauchen, 1997, Estimation of stochastic volatility models with diagnostics, Journal of Econometrics 81, 159-192.
41. Gallant, A. Ronald, Chien-Te Hsu, and George Tauchen, 1999, Using daily range data to calibrate volatility diffusions and extract the forward integrated variance, The Review of Economics and Statistics 81, 617-631.
42. Gallant, A. Ronald, and Jonathan R. Long, 1997, Estimating stochastic differential equations efficiently by minimum Chi-square, Biometrika 84, 125-142.
43. Gallant, A. Ronald, and Douglas W. Nychka, 1987, Semi-nonparametric maximum likelihood estimation, Econometrica 55, 363-390.
44. Gallant, A. Ronald, Peter E. Rossi, and George Tauchen, 1992, Stock prices and volume, The Review of Financial Studies 5, 199-242.
45. Gallant, A. Ronald, and George Tauchen, 1996, Which moments to match? Econometric Theory 12, 657-681.
46. Gallant, A. Ronald, and George Tauchen, 1997, Estimation of continuous-time models for stock returns and interest rates, Macroeconomic Dynamics 1, 135-168.
47. Gallant, A. Ronald, and George Tauchen, 1998, Reprojecting partially observed systems with application to interest rate diffusions, Journal of the American Statistical Association 93, 10-24.
48. Geweke, John, 1996, Monte Carlo simulation and numerical integration, in Hans M. Amman, David A. Kendrick, and John Rust, eds.: Handbooks in Economics, vol. 13, Handbook of Computational Economics, vol. 1, (North-Holland, Amsterdam).
49. Ghysels, Eric, Andrew C. Harvey, and Eric Renault, 1998, Stochastic volatility, in G. S. Maddala and C. R. Rao, eds.: Handbook of Statistics, vol. 14, Statistical Methods in Finance (North-Holland, Amsterdam).
50. Glosten, Lawrence R., Ravi Jagannathan, and David Runkle, 1993, On the relation between the expected value and the volatility of the nominal excess return on stocks, Journal of Finance 48, 1779-1801.
51. Hansen, Lars P., and José A. Scheinkman, 1995, Back to the future: Generating moment implication for continuous-time Markov processes, Econometrica 63, 767-804.
52. Heston, Steven L., 1993, A closed form solution for options with stochastic volatility with applications to bond and currency options, The Review of Financial Studies 6, 327-343.
53. Ho, Mun S., William R. M. Perraudin, and Bent E. Sørensen, 1996, A continuous-time arbitrage pricing model with stochastic volatility and jumps, Journal of Business and Economic Statistics 14, 31-43.
54. Jacquier, Eric, Nicholas G. Polson, and Peter E. Rossi, 1994, Bayesian analysis of stochastic volatility models, Journal of Business and Economic Statistics 12, 371-389.
55. Jarrow, Robert, and Eric Rosenfeld, 1984, Jump risks and the intertemporal capital asset pricing model, Journal of Business 57, 337-351.
56. Jarrow, Robert, and Andrew Rudd, 1982, Approximate option valuation for arbitrary stochastic processes, Journal of Financial Economics 10, 347-369.
57. Jiang, George J., and John L. Knight, 1997, A nonparametric approach to the estimation of diffusion processes, with an application to a short-term interest rate model, Econometric Theory 13, 615-645.
58. Jiang, George J., and John L. Knight, 1999, Efficient estimation of the continuous time stochastic volatility model via the empirical characteristic function, Journal of Business and Economic Statistics, forthcoming.
59. Jiang, George J., and Pieter J. van der Sluis, 1999, Index option pricing models with stochastic volatility and stochastic interest rates, European Finance Review 3, 273-310.
60. Johannes, Michael, 1999, A non-parametric approach to jumps in interest rates, Working paper, Columbia University.
61. Johannes, Michael, Rohit Kumar, and Nicholas G. Polson, 1999, State dependent jump models: How do US equity markets jump? Working paper, University of Chicago.
62. Jones, Christopher S., 1998, Bayesian estimation of continuous-time finance models, Working paper, Rochester University.
63. Jones, Christopher S., 1999, The dynamics of stochastic volatility: Evidence from underlying and option markets, Working paper, Rochester University.
64. Jones, Christopher S., 2001, A nonlinear factor analysis of S&P 500 index option returns, Working paper, Rochester University.
65. Jorion, Philippe, 1988, On jump processes in the foreign exchange and stock markets, The Review of Financial Studies 1, 427-445.
66. Kim, Sangjoon, Neil Shephard, and Siddhartha Chib, 1998, Stochastic volatility: Likelihood inference and comparison with ARCH models, Review of Economic Studies 65, 361-393.
67. Kloeden, Peter E., and Eckhard Platen, 1989, A survey of numerical methods for stochastic differential equations, Stochastic Hydrology and Hydraulics 3, 155-178.
68. Kloeden, Peter E., and Eckhard Platen, 1992, Numerical Solutions of Stochastic Differential Equations (Springer-Verlag, Berlin).
69. Liu, Jun, 1997, Generalized method of moments estimation of affine diffusion processes, Working paper, Graduate School of Business, Stanford University.
70. Liu, Ming, and Harold H. Zhang, 1997, Specification tests in the efficient method of moments framework with application to the stochastic volatility models, Working paper, The Chinese University of Hong Kong and Carnegie Mellon University.
71. Lo, Andrew W., 1988, Maximum likelihood estimation of generalized Itô processes with discretely sampled data, Econometric Theory 4, 231-247.
72. Lo, Andrew W., and A. Craig MacKinlay, 1990, An econometric analysis of nonsynchronous trading, Journal of Econometrics 45, 181-212.
73. Longstaff, Francis A., 1995, Option pricing and the Martingale restriction, The Review of Financial Studies 8, 1091-1124.
74. Melino Angelo, and Stuart M. Turnbull, 1990, Pricing foreign currency options with stochastic volatility, Journal of Econometrics 45, 239-265.
75. Merton, Robert C., 1976, Option pricing when underlying stock returns are discontinuous, Journal of Financial Economics 3, 125-144.
76. Naik, Vasant, 1993, Option valuation and hedging strategies with jumps in the volatility of asset returns, Journal of Finance 48, 1969-1984.
77. Naik, Vasant, and Moon H. Lee, 1990, General equilibrium pricing of options on the market portfolio with discontinuous returns, The Review of Financial Studies 3, 493-521.
78. Nelson, Daniel B., 1991, Conditional heteroskedasticity in asset returns: A new approach, Econometrica 59, 347-370.
79. Pan, Jun, 2002, The jump-risk premia implicit in options: Evidence from an integrated time-series study, Journal of Financial Economics 63, 3-50.
80. Pastorello, Sergio, Eric Renault, and Nizar Touzi, 2000, Statistical inference for random variance option pricing, Journal of Business and Economic Statistics 18, 358-367.
81. Pedersen, Asger, 1995, A new approach to maximum likelihood estimation for stochastic differential equations based on discrete observations, Scandinavian Journal of Statistics 22, 55-71.
82. Poteshman, Allen M., 1998, Estimating a general stochastic variance model from option prices, Working paper, University of Illinois at Urbana-Champaign.
83. Press, S. James, 1967, A compound events model for security prices, Journal of Business 40, 317-335.
84. Protter, Philip, and Denis Talay, 1997, The Euler scheme for Levy driven stochastic differential equations, Annals of Probability 25, 393-423.
85. Rubinstein, Mark, 1994, Implied binomial trees, Journal of Finance 49, 771-818.
86. Singleton, Kenneth J., 2001, Estimation of affine asset pricing models using the empirical characteristic function, Journal of Econometrics 102, 111-141.
87. Stanton, Richard H., 1997, A nonparametric model of term structure dynamics and the market price of interest rate risk, Journal of Finance 52, 1973-2002.
88. van der Sluis, Pieter J., 1997, Computationally attractive stability tests for the efficient method of moments, Working paper, University of Amsterdam.