Asymmetry in Volatility: A Comparison of Developed and Transition Stock Markets
AbstractARCH modelling framework of Engle (1982) and its GARCH generalization of Bollerslev (1986) gave a huge impetus to econometric model building in the field of financial time series with time-varying variance. The main idea of the models was to describe the most typical features of capital markets like volatility clustering, excess kurtosis and fat tails. As empirical evidence shows asymmetry is also a prominent feature of stock market returns volatility. The reaction of risk if stock returns go off the long run trajectory is different in case of positive and negative market news. Thus it is indispensable to employ asymmetric models being a modification of a traditional GARCH. In the paper we used an approach of Engle and Ng (1993) to test for asymmetric effects in stock indices of developed and Central European stock markets.
Download InfoIf 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.
Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2974.
Date of creation: 2010
Date of revision:
asymmetry; volatility; stock market; transition;
Find related papers by JEL classification:
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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.:
- Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993.
"On the relation between the expected value and the volatility of the nominal excess return on stocks,"
Staff Report, Federal Reserve Bank of Minneapolis
157, Federal Reserve Bank of Minneapolis.
- Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, American Finance Association, vol. 48(5), pages 1779-1801, December.
- Yung-Shi Liau & Jack Yang, 2008. "The mean/volatility asymmetry in Asian stock markets," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 18(5), pages 411-419.
- Schwert, G.W. & Seguin, P.J., 1988.
"Heteroskedasticity In Stock Returns,"
Papers, Rochester, Business - General
bc_88-02, Rochester, Business - General.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 987-1007, July.
- Gregory Koutmos & Andreas Pericli & Lenos Trigeorgis, 2006. "Short-term Dynamics in the Cyprus Stock Exchange," The European Journal of Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(3), pages 205-216.
- Chen, Cathy W.S. & Yang, Ming Jing & Gerlach, Richard & Jim Lo, H., 2006. "The asymmetric reactions of mean and volatility of stock returns to domestic and international information based on a four-regime double-threshold GARCH model," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 366(C), pages 401-418.
- Ng, Victor & Engle, Robert F. & Rothschild, Michael, 1992. "A multi-dynamic-factor model for stock returns," Journal of Econometrics, Elsevier, Elsevier, vol. 52(1-2), pages 245-266.
- Christie, Andrew A., 1982. "The stochastic behavior of common stock variances : Value, leverage and interest rate effects," Journal of Financial Economics, Elsevier, Elsevier, vol. 10(4), pages 407-432, December.
- Schwert, G William, 1990.
"Stock Volatility and the Crash of '87,"
Review of Financial Studies, Society for Financial Studies,
Society for Financial Studies, vol. 3(1), pages 77-102.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, Elsevier, vol. 31(3), pages 307-327, April.
- McAleer, Michael & Chan, Felix & Marinova, Dora, 2007. "An econometric analysis of asymmetric volatility: Theory and application to patents," Journal of Econometrics, Elsevier, Elsevier, vol. 139(2), pages 259-284, August.
- Priti Verma & Dave Jackson, 2008. "Interest rate and bank stock returns asymmetry: Evidence from U.S. banks," Journal of Economics and Finance, Springer, Springer, vol. 32(2), pages 105-118, April.
- Bjorn Hansson & Peter Hordahl, 2005. "Forecasting variance using stochastic volatility and GARCH," The European Journal of Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 11(1), pages 33-57.
- French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, Elsevier, vol. 19(1), pages 3-29, September.
- Dima Alberg & Haim Shalit & Rami Yosef, 2008. "Estimating stock market volatility using asymmetric GARCH models," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 18(15), pages 1201-1208.
- Robert F. Engle & Victor K. Ng, 1991.
"Measuring and Testing the Impact of News on Volatility,"
NBER Working Papers
3681, National Bureau of Economic Research, Inc.
- Engle, Robert F & Ng, Victor K, 1993. " Measuring and Testing the Impact of News on Volatility," Journal of Finance, American Finance Association, American Finance Association, vol. 48(5), pages 1749-78, December.
- Hull, John C & White, Alan D, 1987. " The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance, American Finance Association, American Finance Association, vol. 42(2), pages 281-300, June.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, Econometric Society, vol. 59(2), pages 347-70, March.
- 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, Elsevier, vol. 52(1-2), pages 5-59.
- Lai, Jing-yi, 2012. "Shock-dependent conditional skewness in international aggregate stock markets," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 52(1), pages 72-83.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If references are entirely missing, you can add them using this form.