Empirical Economics

, Volume 24, Issue 2, pp 303–322

Volatility spillovers and the price of risk: Evidence from the Swiss stock market

  • Christian Jochum

DOI: 10.1007/s001810050056

Cite this article as:
Jochum, C. Empirical Economics (1999) 24: 303. doi:10.1007/s001810050056

Abstract.

This paper investigates the behavior of the risk premium on the Swiss stock market. The risk premium consists of two components, which are estimated separately: the amount of volatility and the unit price of risk. By estimating a bivariate GARCH-M model the volatility of the Swiss market is found to be strongly exposed to spillovers from the other major financial markets. To estimate the unit price of risk a Kalman filter procedure is employed, which allows for variability in this variable. Investors place a high price on risk, when the market is considered `expensive'.

Key words: Volatility spillovers risk premium Kalman filter 
JEL classification: C22 G12 

Copyright information

© Springer-Verlag Berlin Heidelberg 1999

Authors and Affiliations

  • Christian Jochum
    • 1
  1. 1.Department of Economics (SIASR-HSG), University of St. Gallen, Dufourstr. 48, CH-9000 St. Gallen, Switzerland (e-mail: christian.jochum@siasr.unisg.ch)CH

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