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Asymmetric and crash effects in stock volatility for the S&P 100 index and its constituents

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  • Bevan Blair
  • Ser-Huang Poon
  • Stephen Taylor

Abstract

The volatility processes of the S&P 100 index and all its constituent stocks are compared after estimating ARCH models from ten years of daily returns, from 1983 to 1992. The leverage effect of Black (1976) is estimated from an extension of the asymmetric volatility model of Glosten et al. (1993) that isolates the effects of the crash in October 1987. The index and the majority of stocks have a greater volatility response to negative returns than to positive returns and the asymmetry is higher for the index than for most stocks. Conclusions about volatility asymmetry and persistence change when the crash is considered to be an extraordinary event.

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Bibliographic Info

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

Volume (Year): 12 (2002)
Issue (Month): 5 ()
Pages: 319-329

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Handle: RePEc:taf:apfiec:v:12:y:2002:i:5:p:319-329

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Cited by:
  1. Taylor, Stephen J. & Yadav, Pradeep K. & Zhang, Yuanyuan, 2009. "Cross-sectional analysis of risk-neutral skewness," CFR Working Papers 09-11, University of Cologne, Centre for Financial Research (CFR).
  2. Jorge Caiado, 2004. "Modelling And Forecasting The Volatility Of The Portuguese Stock Index Psi-20," Portuguese Journal of Management Studies, ISEG, Technical University of Lisbon, vol. 0(1), pages 3-21.

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