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On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks

Lawrence R. Glosten; Ravi Jagannathan; David E. Runkle · The Journal of Finance · 1993

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Author / responsible party
Lawrence R. Glosten; Ravi Jagannathan; David E. Runkle
Publisher
The Journal of Finance
Year
1993
Language
English

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ABSTRACT We find support for a negative relation between conditional expected monthly return and conditional variance of monthly return, using a GARCH‐M model modified by allowing (1) seasonal patterns in volatility, (2) positive and negative innovations to returns having different impacts on conditional volatility, and (3) nominal interest rates to predict conditional variance. Using the modified GARCH‐M model, we also show that monthly conditional volatility may not be as persistent as was thought. Positive unanticipated returns appear to result in a downward revision of the conditional volatility whereas negative unanticipated returns result in an upward revision of conditional volatility.

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APA 7

Glosten, L. R, Jagannathan, R, & Runkle, D. E. (1993). On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks. https://doi.org/10.1111/j.1540-6261.1993.tb05128.x

MLA

Glosten, Lawrence R, et al. "On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks." 1993. https://doi.org/10.1111/j.1540-6261.1993.tb05128.x.

Chicago

Glosten, Lawrence R, Ravi Jagannathan, and David E. Runkle. 1993. "On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks.". https://doi.org/10.1111/j.1540-6261.1993.tb05128.x.

Harvard

Glosten, L. R, Jagannathan, R. and Runkle, D. E. 1993, On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks, The Journal of Finance, available at: https://doi.org/10.1111/j.1540-6261.1993.tb05128.x [Accessed 7 Aug. 2026].

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Resource details

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Title
On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks
Author / contributors
Lawrence R. Glosten; Ravi Jagannathan; David E. Runkle
Publisher
The Journal of Finance
Publication year
1993
Language
English

Subjects

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Volatility (finance); Conditional variance; Autoregressive conditional heteroskedasticity; Econometrics; Forward volatility; Economics; Conditional expectation; Implied volatility; Financial economics
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