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Time-varying risk attitude and conditional skewness. (English) Zbl 1406.91202

Summary: Much literature finds that the skewness in the return distribution is negatively correlated with the risk premium coefficient, and speculation is the reason for the skewness in the return distribution. As further research, this paper, first taking up the time-varying property of the risk premium coefficient, proposes a GARCH-M model with a time-varying coefficient of the risk premium for an empirical study of the correlation between the conditional skewness in the return distribution and the time-varying risk attitude. The empirical study indicates that the coefficient of the risk premium varies with the time, and even in a mature market the conditional skewness in the return distribution is negatively correlated with the time-varying coefficient of the risk premium.

MSC:

91B30 Risk theory, insurance (MSC2010)
62P05 Applications of statistics to actuarial sciences and financial mathematics
62M10 Time series, auto-correlation, regression, etc. in statistics (GARCH)
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