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Non-trading day effects in asymmetric conditional and stochastic volatility models

Author

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  • Manabu Asai
  • Michael McAleer

Abstract

It is well known that non-trading days (or holidays) can have significant effects on the returns in financial series. In this paper, we analyze three models of non-trading day effects in stochastic volatility models with leverage effects, namely (i) the approach based on the dummy variable in conditional volatility models; (ii) the approach based on a discrete time approximation of a continuous time stochastic volatility model and (iii) the twin non-trading day stochastic volatility model which nests the above two models. The three models are also estimated and tested within the asymmetric and exponential conditional volatility frameworks. All the models within the stochastic, asymmetric conditional and exponential conditional volatility frameworks are estimated and compared using a selection of financial returns series. Copyright Royal Economic Society 2007

Suggested Citation

  • Manabu Asai & Michael McAleer, 2007. "Non-trading day effects in asymmetric conditional and stochastic volatility models," Econometrics Journal, Royal Economic Society, vol. 10(1), pages 113-123, March.
  • Handle: RePEc:ect:emjrnl:v:10:y:2007:i:1:p:113-123
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    Cited by:

    1. McAleer, Michael & Medeiros, Marcelo C., 2008. "A multiple regime smooth transition Heterogeneous Autoregressive model for long memory and asymmetries," Journal of Econometrics, Elsevier, vol. 147(1), pages 104-119, November.
    2. Barrera, Carlos R., 2010. "Redes neuronales para predecir el tipo de cambio diario," Working Papers 2010-001, Banco Central de Reserva del Perú.

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