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Asymmetry with respect to the memory in stock market volatilities

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  • Lönnbark, Carl

    () (Department of Economics, Umeå University)

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    Abstract

    The empirically most relevant stylized facts when it comes to modeling time varying financial volatility are the asymmetric response to return shocks and the long memory property. Up till now, these have largely been modeled in isolation though. To more flexibly capture asymmetry also with respect to the memory structure we introduce a new model and apply it to stock market index data. We find that, although the effect on volatility of negative return shocks is higher than for positive ones, the latter are more persistent and relatively quickly dominate negative ones.

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    File URL: http://www.econ.umu.se/DownloadAsset.action?contentId=198825&languageId=3&assetKey=ues849
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    Bibliographic Info

    Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 849.

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    Length: 19 pages
    Date of creation: 03 Oct 2012
    Date of revision:
    Handle: RePEc:hhs:umnees:0849

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    Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
    Phone: 090 - 786 61 42
    Fax: 090 - 77 23 02
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    Web page: http://www.econ.umu.se/
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    Related research

    Keywords: Financial econometrics; GARCH; news impact; nonlinear; risk prediction; time series;

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