In this paper, we extend the concept of News Impact Curve developed by Engle and Ng (1993) to the higher moments of the multivariate returns' distribution, thereby providing a tool to investigate the impact of shocks on the characteristics of the subsequent distribution. For this purpose, we present a new methodology to describe the joint distribution of returns in a non-normal setting. This methodology allows to gain a better understanding of the temporal evolution of the returns' distribution and can be used to analyze the behavior of the optimal portfolio distribution. We apply our methodology to provide stylized facts on the four largest international stock markets. In particular, we document the persistence in large (positive or negative) daily returns. In a multivariate setting, we find that foreign holdings provide a good hedge against changes in domestic volatility after good shocks but a bad hedge after crashes.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Cited by: (explanations, 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.)