Forecasting Volatility and the Risk–Return Tradeoff: An Application on the Fama–French Benchmark Market Return

Abstract

The paper uses the daily stock market index returns of Fama–French to attempt a comparative forecasting analysis of different volatility models. The comparison naturally pre-requests the specification of the competing volatility frameworks and therefore the paper among other issues deals with dilemmas about whether volatility–return relations hold. As expected the analysis focuses on FIEGARCH-M models that extend the basic long memory volatility framework of