No news is good news *1: An asymmetric model of changing volatility in stock returns
AbstractIt seems plausible that an increase in stock market volatility raises required stock returns, and thus lowers stock prices. We develop a formal model of this volatility feedback effect using a simple model of changing variance (a quadratic generalized autoregressive conditionally heteroskedastic, or QGARCH, model). Our model is asymmetric and helps to explain the negative skewness and excess kurtosis of U.S. monthly and daily stock returns over the period 1926Ã¢â¬â1988. We find that volatility feedback normally has little effect on returns, but it can be important during periods of high volatility.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Financial Economics.
Volume (Year): 31 (1992)
Issue (Month): 3 (June)
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Web page: http://www.elsevier.com/locate/inca/505576
Other versions of this item:
- Hentschel, Ludger & Campbell, John, 1992. "No News is Good News: An Asymmetric Model of Changing Volatility in Stock Returns," Scholarly Articles 3220232, Harvard University Department of Economics.
- John Y. Campbell & Ludger Hentschel, 1991. "No News is Good News: An Asymmetric Model of Changing Volatility in Stock Returns," NBER Working Papers 3742, National Bureau of Economic Research, Inc.
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