Empirical Validation on Excess Volatility Puzzle | Asian Journal of Economics, Finance and Managemen

We investigate the market's excess volatility conundrum by comparing the volatility of the S&P 500 and the 10-year Treasury yield across the sample period of 2013 to 2019. To check the riddle, we use three alternative ways to measure the volatility of stock and bond returns: Historical volatility, volatility indexes, and econometric models are all examples of historical volatility. We propose a variation measure to examine the riddle using normal and independent assumptions for stock and bond returns. The findings of the three models reveal that the variance of stock and bond excess returns varies with time. The inefficiency of markets is demonstrated by the time-varying variance of excess return, which indicates the predictability of excess return over time.

Please see the link :- https://globalpresshub.com/index.php/AJEFM/article/view/822