... measure, and moreimportantly, EMM lends us the ability to test whether the model specification is ac-ceptable or not. Test of such a hypothesis, combined with the test of the above jointhypothesis, ... increase the volatility of the next period and a positive shock will tend to decrease the volatility of the next period.Advantages of the proposed model include: First, the model explicitly incorporates the ... (1979), and Amin and Ng (1993). Our model incorporatesboth the effects of idiosyncratic volatility and systematic volatility of the underlyingstock returns into option valuation and at the same...