Asymmetry effects of shocks in Chinese stock markets volatility: A generalized additive nonparametric approach
AbstractThe unique characteristics of the Chinese stock markets make it difficult to assume a particular distribution for innovations in returns and the specification form of the volatility process when modelling return volatility with the parametric GARCH family models. This paper therefore applies a generalized additive nonparametric smoothing technique to examine the volatility of the Chinese stock markets. The empirical results indicate that an asymmetric effect of negative news exists in the Chinese stock markets. Furthermore, compared with other parametric models, the generalized additive nonparametric model demonstrates a better performance for return volatility forecasts, particularly for the out-of-sample forecast. The results from this paper have important implications in risk management, portfolio selection, and hedging strategy.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.
Volume (Year): 23 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/intfin
Asymmetry effect; Nonparametric GARCH model; Chinese stockmarket; News impact curve; Additive approach;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
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