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Alternative GARCH in Mean Models: An Application to the Korean Stock Market

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  • Menelaos Karanasos
  • J. Kim

Abstract

The purpose of this paper is the theoretical and empirical comparison of alternative GARCH-in-mean models. We examine three GARCH specifications: Bollerslev's (1986) GARCH model, Taylor (1986) - Schwert's (1989) GARCH model, and Nelson's (1991) Exponential GARCH model. In addition, we employ four of the most common forms in which the time-varying variance enters the specification of the mean to determine the risk premium: the quadratic, the linear, the logarithmic and the square root one. For all the aforementioned models we give the auto/cross correlations of the process and its conditional variance. The practical implications of the results are illustrated empirically using daily data on the Korean Stock Price Index (KOSPI).

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Paper provided by Department of Economics, University of York in its series Discussion Papers with number 00/25.

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Handle: RePEc:yor:yorken:00/25

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Cited by:
  1. Tsatsura, Oleg, 2010. "A Smooth Transition GARCH-M Model," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 17(1), pages 45-61.
  2. M. Karanasos & J. Kim, 2003. "Moments of the ARMA--EGARCH model," Econometrics Journal, Royal Economic Society, vol. 6(1), pages 146-166, 06.
  3. MaurĂ­cio Yoshinori Une & Marcelo Savino Portugal, 2005. "Can fear beat hope? A story of GARCH-in-Mean-Level effects for Emerging Market Country Risks," Econometrics 0509006, EconWPA.

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