An empirical investigation of continuous-time equity return models

Torben G. Andersen, Luca Benzoni, Jesper Lund

Research output: Contribution to journalArticlepeer-review

485 Scopus citations


This paper extends the class of stochastic volatility diffusions for asset returns to encompass Poisson jumps of time-varying intensity. We find that any reasonably descriptive continuous-time model for equity-index returns must allow for discrete jumps as well as stochastic volatility with a pronounced negative relationship between return and volatility innovations. We also find that the dominant empirical characteristics of the return process appear to be priced by the option market. Our analysis indicates a general correspondence between the evidence extracted from daily equity-index returns and the stylized features of the corresponding options market prices.

Original languageEnglish (US)
Pages (from-to)1239-1284
Number of pages46
JournalJournal of Finance
Issue number3
StatePublished - Jun 2002

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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