Advanced Search
MyIDEAS: Login to save this article or follow this journal

Dynamic Asymmetric Leverage in Stochastic Volatility Models

Contents:

Author Info

  • Manabu Asai
  • Michael McAleer

Abstract

In the class of stochastic volatility (SV) models, leverage effects are typically specified through the direct correlation between the innovations in both returns and volatility, resulting in the dynamic leverage (DL) model. Recently, two asymmetric SV models based on threshold effects have been proposed in the literature. As such models consider only the sign of the previous return and neglect its magnitude, this paper proposes a dynamic asymmetric leverage (DAL) model that accommodates the direct correlation as well as the sign and magnitude of the threshold effects. A special case of the DAL model with zero direct correlation between the innovations is the asymmetric leverage (AL) model. The dynamic asymmetric leverage models are estimated by the Monte Carlo likelihood (MCL) method. Monte Carlo experiments are presented to examine the finite sample properties of the estimator. For a sample size of T�=�2000 with 500 replications, the sample means, standard deviations, and root mean squared errors of the MCL estimators indicate only a small finite sample bias. The empirical estimates for S&P 500 and TOPIX financial returns, and USD/AUD and YEN/USD exchange rates, indicate that the DAL class, including the DL and AL models, is generally superior to threshold SV models with respect to AIC and BIC, with AL typically providing the best fit to the data.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. 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://www.tandfonline.com/doi/abs/10.1080/07474930500243035
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Econometric Reviews.

Volume (Year): 24 (2005)
Issue (Month): 3 ()
Pages: 317-332

as in new window
Handle: RePEc:taf:emetrv:v:24:y:2005:i:3:p:317-332

Contact details of provider:
Web page: http://www.tandfonline.com/LECR20

Order Information:
Web: http://www.tandfonline.com/pricing/journal/LECR20

Related research

Keywords: Asymmetric effects; Monte Carlo likelihood; Stochastic volatility; Threshold effects;

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:taf:emetrv:v:24:y:2005:i:3:p:317-332. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.