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Stock returns, seasonality and asymmetric conditional volatility in world equity markets

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  • Ercan Balaban
  • Asli Bayar
  • Ozgur Berk Kan
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    Abstract

    The paper tests four hypotheses at the same time using an autoregressive return-generating process and an asymmetric conditional variance specification, both also including deterministic day of the week dummies. The daily stock index returns from 19 countries are employed to test: (H1) predictable time variation in conditional volatility; (H2) asymmetry in volatility and leverage effect; (H3) effects of estimated volatility on returns; and (H4) day of the week effects on both returns and their volatility. Evidence is provided for predictable time varying daily volatility in all markets among which eight also exhibit a significant leverage effect. There is a significantly positive relationship between returns and their conditional volatility in only three countries. The nature of the day of the week effects on returns and their conditional volatility differs greatly among countries and across days. Thirteen countries exhibit seasonality in either mean returns (seven countries) or volatility (eight countries) or both (two countries). Each day is at least once reported to exhibit significant positive and negative effects in both mean and volatility with the exception that there is no negative effect on mean returns and no positive effect in volatility on Wednesdays.

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    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/135048501750104051&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

    Volume (Year): 8 (2001)
    Issue (Month): 4 ()
    Pages: 263-268

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    Handle: RePEc:taf:apeclt:v:8:y:2001:i:4:p:263-268

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    Cited by:
    1. Amélie Charles, 2010. "The day-of-the week effects on the volatility: The role of the asymmetry," Post-Print hal-00771136, HAL.
    2. Venus Khim-Sen Liew & Ricky Chee-Jiun Chia & Syed Azizi Wafa Syed Khalid Wafa, 2008. "Day-of-the-week effects in Selected East Asian stock markets," Economics Bulletin, AccessEcon, vol. 7(5), pages 1-8.
    3. Denise R. Osborn & Christos S. Savva & Len Gill, 2008. "Periodic Dynamic Conditional Correlations between Stock Markets in Europe and the US," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 6(3), pages 307-325, Summer.
    4. Högholm, Kenneth & Knif, Johan, 2009. "The impact of portfolio aggregation on day-of-the-week effect: Evidence from Finland," Global Finance Journal, Elsevier, vol. 20(1), pages 67-79.
    5. Paul Alagidede & Theodore Panagiotidis, 2006. "Calendar Anomalies in an Emerging African Market: Evidence from the Ghana Stock Exchange," Discussion Paper Series 2006_13, Department of Economics, Loughborough University, revised Jun 2006.
    6. repec:ebl:ecbull:v:7:y:2008:i:5:p:1-8 is not listed on IDEAS
    7. Aityan, Sergey K. & Ivanov-Schitz, Alexey K. & Izotov, Sergey S., 2010. "Time-shift asymmetric correlation analysis of global stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(5), pages 590-605, December.

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