Volatility clustering, leverage effects, and jumps dynamics in emerging Asian equity markets
AbstractThis paper proposes a mixed GARCH-Jump model that is tailored to the specific circumstances arising in emerging equity markets. Our model accommodates lagged currency returns as a local information variable in the autoregressive jump intensity function, incorporates jumps in the returns and volatility, and allows volatility to respond asymmetrically to both normal innovations and jump shocks. The model captures the distinguishing features of the Asian index returns and significantly improves the fit for those markets that were affected by the 1997 Asian crisis. Our proposed model yields higher levels of conditional kurtosis and superior forecasts of the expected arrival rate of jumps.
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Bibliographic InfoPaper provided by University of New Orleans, Department of Economics and Finance in its series Working Papers with number 2004-05.
Length: 47 pages
Date of creation: 30 Sep 2004
Date of revision:
Jumps; Volatility; Leverage effects; Emerging markets; Asia; Equity markets;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-03 (All new papers)
- NEP-ETS-2005-04-03 (Econometric Time Series)
- NEP-FIN-2005-04-03 (Finance)
- NEP-FMK-2005-04-03 (Financial Markets)
- NEP-SEA-2005-04-03 (South East Asia)
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