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- Title
Initial Margin Requirements and Stock Returns Volatility: Another Look.
- Authors
Kupiec, Paul H.
- Abstract
This article investigates the relationship between initial margin requirements and stock return volatility. Volatility is measured using a GARCH in Mean model. We find no evidence of an empirical relationship between margin requirements and the volatility of the S&P 500 index portfolio's excess returns. Evidence from short-sale data, and model sensitivity analysis are presented which support the hypothesis of no margin-volatility relationship. The results are consistent with the intertemporal CAPM model of Merton (1973) with an aggregate relative risk aversion measure of 4.1. In addition, we find evidence of long-term memory in conditional return distributions' volatility.
- Subjects
MARGINS (Security trading); FINANCIAL markets; MARKET volatility; MARGIN requirements; RISK aversion; FUTURES market
- Publication
Journal of Financial Services Research, 1989, Vol 3, Issue 2/3, p287
- ISSN
0920-8550
- Publication type
Article
- DOI
10.1007/BF00122807