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A Threshold Stochastic Volatility Model

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Author Info
So, Mike K P
Li, W K
Lam, K
Abstract

This article introduces a new model to capture simultaneously the mean and variance asymmetries in time series. Threshold non-linearity is incorporated into the mean and variance specifications of a stochastic volatility model. Bayesian methods are adopted for parameter estimation. Forecasts of volatility and Value-at-Risk can also be obtained by sampling from suitable predictive distributions. Simulations demonstrate that the apparent variance asymmetry documented in the literature can be due to the neglect of mean asymmetry. Strong evidence of the mean and variance asymmetries was detected in U.S. and Hong Kong data. Asymmetry in the variance persistence was also discovered in the Hong Kong stock market. Copyright © 2002 by John Wiley & Sons, Ltd.

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

Volume (Year): 21 (2002)
Issue (Month): 7 (November)
Pages: 473-500
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:jof:jforec:v:21:y:2002:i:7:p:473-500

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966

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  1. Manabu Asai & Michael McAleer, 2005. "Asymmetric Multivariate Stochastic Volatility," DEA Working Papers 12, Universitat de les Illes Balears, Departament d'Economía Aplicada. [Downloadable!]
  2. Aliou Diop & Dominique Guegan, 2005. "tail behavior of a threshold autoregressive stochastic volatility model," Post-Print halshs-00188530_v1, HAL. [Downloadable!]
  3. Matthew C. Li, 2003. "Wealth, Volume and Stock Market Volatility: Case of Hong Kong (1993-2001)," Trinity Economics Papers 20035, Trinity College Dublin, Department of Economics. [Downloadable!]
  4. 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!]
  5. Adam Clements & Scott White, 2005. "Non-linear filtering with state dependant transition probabilities: A threshold (size effect) SV model," School of Economics and Finance Discussion Papers and Working Papers Series 191, School of Economics and Finance, Queensland University of Technology. [Downloadable!]
  6. Hisashi Tanizaki & Shigeyuki Hamori, 2009. "Volatility transmission between Japan, UK and USA in daily stock returns," Empirical Economics, Springer, vol. 36(1), pages 27-54, February. [Downloadable!] (restricted)
  7. Esther Ruiz & Helena Veiga, 2006. "Modelling Long-Memory Volatilities With Leverage Effect: Almsv Versus Fiegarch," Statistics and Econometrics Working Papers ws066016, Universidad Carlos III, Departamento de Estadística y Econometría. [Downloadable!]
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