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Does Volatility Respond Asymmetric To Past Shocks?

Author

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  • Claudiu Botoc

    (West University of Timisoara Romania)

Abstract

The main aim of the paper is to examine if the stock market volatility exhibits asymmetric or an asymmetric response to past shocks, for certain CEE countries (Romania,Hungary, Bulgaria, Poland) over the period May 2004 - September 2014. For the stock marketsfrom East Europe the results are in line with the symmetric volatility, i.e. volatility is similaraffected by both positive and negative returns with the same magnitude. For the stock marketsfrom Central Europe the results are consistent with the leverage hypothesis of the asymmetricvolatility, i.e. negative and positive returns with the same magnitude have different impact onvolatility. Furthermore the volatility is more sensitive to its lagged values in the market place thanit is to new information. These results reinforce the diversification principle that has to beconsidered in portfolio and risk management process.

Suggested Citation

  • Claudiu Botoc, 2014. "Does Volatility Respond Asymmetric To Past Shocks?," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(16), pages 1-5.
  • Handle: RePEc:alu:journl:v:2:y:2014:i:16:p:5
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    More about this item

    Keywords

    volatility; leverage effect; feedback hypothesis; CEE countries; GARCH;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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