Adrian R. Pagan

Australian National University

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G. William Schwert

University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research

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Journal of Econometrics, 45 (July 1990) 267-290

Journal of Econometrics All Star Paper

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This paper compares several statistical models for monthly stock return volatility. The focus is on U.S. data from 1834-1925 because the post-1926 data have been analyzed in more detail by others. Also, the Great Depression had levels of stock volatility that are inconsistent with stationary models for conditional heteroskedasticity. We show the importance of nonlinearities in stock return behavior that are not captured by conventional ARCH or GARCH models. We also show the nonstationarity of stock volatility.

Key words: Volatility, Heteroskedasticity, Stock Market, ARCH, GARCH, Nonparametric, Kernel, Fourier

JEL Classifications: G14, C22

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Cited 345 times in the SSCI and SCOPUS through 2008

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© Copyright 1990, Elsevier

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