This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

An empirical analysis of alternative parametric ARCH models

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Geoffrey F. Loudon (Macquarie University, Australia)
Wing H. Watt (DBS Bank, Singapore)
Pradeep K. Yadav (Department of Accounting and Finance, University of Strathclyde, 100 Cathedral Street, Glasgow G4 0LN, UK)
Abstract

This paper presents empirical evidence on the effectiveness of eight different parametric ARCH models in describing daily stock returns. Twenty-seven years of UK daily data on a broad-based value weighted stock index are investigated for the period 1971-97. Several interesting results are documented. Overall, the results strongly demonstrate the utility of parametric ARCH models in describing time-varying volatility in this market. The parameters proxying for asymmetry in models that recognize the asymmetric behaviour of volatility are highly significant in each and every case. However, the 'performance' of the various parameterizations is often fairly similar with the exception of the multiplicative GARCH model that performs qualitatively differently on several dimensions of performance. The outperformance of any model(s) is not consistent across different sub-periods of the sample, suggesting that the optimal choice of a model is period-specific. The outperformance is also not consistent as we change from in-sample inferences to out-of-sample inferences within the same period. Copyright © 2000 John Wiley & Sons, Ltd.Journal: Journal of Applied Econometrics

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://qed.econ.queensu.ca:80/jae/2000-v15.2/
File Format: text/html
File Function: Supporting data files and programs
Download Restriction: no

Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 15 (2000)
Issue (Month): 2 ()
Pages: 117-136
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:jae:japmet:v:15:y:2000:i:2:p:117-136

Contact details of provider:
Web page: http://www.interscience.wiley.com/jpages/0883-7252/

Order Information:
Email:
Web: http://www3.interscience.wiley.com/jcatalog/subscribe.jsp?issn=0883-7252

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Baillie, Richard T & Bollerslev, Tim, 1989. "The Message in Daily Exchange Rates: A Conditional-Variance Tale," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(3), pages 297-305, July.
    Other versions:
  2. Schwert, G William, 1990. "Stock Volatility and the Crash of '87," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 3(1), pages 77-102. [Downloadable!] (restricted)
    Other versions:
  3. French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, vol. 19(1), pages 3-29, September. [Downloadable!] (restricted)
  4. Schwert, G William, 1989. " Why Does Stock Market Volatility Change over Time?," Journal of Finance, American Finance Association, vol. 44(5), pages 1115-53, December. [Downloadable!] (restricted)
    Other versions:
  5. Pagan, Adrian R. & Schwert, G. William, 1990. "Alternative models for conditional stock volatility," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 267-290. [Downloadable!] (restricted)
    Other versions:
  6. Engle, Robert F & Ng, Victor K, 1993. " Measuring and Testing the Impact of News on Volatility," Journal of Finance, American Finance Association, vol. 48(5), pages 1749-78, December. [Downloadable!] (restricted)
    Other versions:
  7. Higgins, Matthew L & Bera, Anil K, 1992. "A Class of Nonlinear ARCH Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 137-58, February. [Downloadable!] (restricted)
    Other versions:
  8. Philippe Jorion, 1988. "On Jump Processes in the Foreign Exchange and Stock Markets," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 1(4), pages 427-445. [Downloadable!] (restricted)
  9. Zakoian, Jean-Michel, 1994. "Threshold heteroskedastic models," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 931-955, September. [Downloadable!] (restricted)
  10. Poon, Ser-Huang & Taylor, Stephen J., 1992. "Stock returns and volatility: An empirical study of the UK stock market," Journal of Banking & Finance, Elsevier, vol. 16(1), pages 37-59, February. [Downloadable!] (restricted)
  11. West, Kenneth D. & Cho, Dongchul, 1995. "The predictive ability of several models of exchange rate volatility," Journal of Econometrics, Elsevier, vol. 69(2), pages 367-391, October. [Downloadable!] (restricted)
    Other versions:
  12. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March. [Downloadable!] (restricted)
  13. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59. [Downloadable!] (restricted)
  14. E.K. Berndt & B.H. Hall & R.E. Hall, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 103-116 National Bureau of Economic Research, Inc. [Downloadable!]
  15. Poterba, James M & Summers, Lawrence H, 1986. "The Persistence of Volatility and Stock Market Fluctuations," American Economic Review, American Economic Association, vol. 76(5), pages 1142-51, December. [Downloadable!] (restricted)
    Other versions:
  16. Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-47, August. [Downloadable!] (restricted)
  17. Rabemananjara, R & Zakoian, J M, 1993. "Threshold Arch Models and Asymmetries in Volatility," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(1), pages 31-49, Jan.-Marc. [Downloadable!] (restricted)
  18. Christie, Andrew A., 1982. "The stochastic behavior of common stock variances : Value, leverage and interest rate effects," Journal of Financial Economics, Elsevier, vol. 10(4), pages 407-432, December. [Downloadable!] (restricted)
  19. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 83-106, June. [Downloadable!] (restricted)
    Other versions:
  20. Sentana,E., 1995. "Quadratic Arch Models," Papers 9517, Centro de Estudios Monetarios Y Financieros-.
    Other versions:
  21. Chou, Ray Yeutien, 1988. "Volatility Persistence and Stock Valuations: Some Empirical Evidence Using Garch," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 3(4), pages 279-94, October-D. [Downloadable!] (restricted)
  22. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April. [Downloadable!] (restricted)
  23. Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 253-63, July.
    Other versions:
  24. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-617, December. [Downloadable!] (restricted)
  25. McCurdy, Thomas H. & Morgan, Ieuan G., 1987. "Tests of the martingale hypothesis for foreign currency futures with time-varying volatility," International Journal of Forecasting, Elsevier, vol. 3(1), pages 131-148. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Robert F. Engle & Kevin Sheppard, 2001. "Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH," University of California at San Diego, Economics Working Paper Series 2001-15, Department of Economics, UC San Diego. [Downloadable!]
    Other versions:
  2. María José Rodríguez & Esther Ruiz, 2009. "GARCH models with leverage effect : differences and similarities," Statistics and Econometrics Working Papers ws090302, Universidad Carlos III, Departamento de Estadística y Econometría. [Downloadable!]
  3. Peter Reinhard Hansen & Asger Lunde & James M. Nason, 2003. "Choosing the best volatility models: the model confidence set approach," Working Paper 2003-28, Federal Reserve Bank of Atlanta. [Downloadable!]
    Other versions:
  4. M. Angeles Carnero & Daniel Peña & Esther Ruiz, 2001. "Is Stochastic Volatility More Flexible Than Garch?," Statistics and Econometrics Working Papers ws010805, Universidad Carlos III, Departamento de Estadística y Econometría. [Downloadable!]
  5. Gabriela De Raaij & Burkhard Raunig, 2005. "Evaluating density forecasts from models of stock market returns," European Journal of Finance, Taylor and Francis Journals, vol. 11(2), pages 151-166, April. [Downloadable!] (restricted)
  6. M. Angeles Carnero & Daniel Peña & Esther Ruiz, 2001. "Outliers And Conditional Autoregressive Heteroscedasticity In Time Series," Statistics and Econometrics Working Papers ws010704, Universidad Carlos III, Departamento de Estadística y Econometría. [Downloadable!]
  7. Kin-Yip Ho & Ka Cheng Tsui, 2004. "Volatility Dynamics of the Tokyo Stock Exchange: A Sectoral Analysis based on the Multivariate GARCH Approach," Money Macro and Finance (MMF) Research Group Conference 2004 12, Money Macro and Finance Research Group. [Downloadable!]
Statistics
Access and download statistics

Did you know? IDEAS was sponsored from 1997 to 2002 by the Université du Québec à Montréal.

This page was last updated on 2009-11-21.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.