IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Sign- and Volatility-Switching ARCH Models: Theory and Applications to International Stock Markets

  • Fornari, Fabio
  • Mele, Antonio

This paper develops two conditionally heteroscedastic models which allow an asymmetric reaction of the conditional volatility to the arrival of news. Such a reaction is induced by both the sign of past shocks and the size of past unexpected volatility. The proposed models are shown to converge in distribution to absolutely continuous Ito diffusion processes, as happens for other heteroscedastic formulations. One of the schemes developed in the paper--the Volatility-switching ARCH--differs from the existing asymmetric models insofar as it is able to capture a particular aspect of the behaviour of the volatilities, i.e., the reversion of their asymmetric reaction to news. Empirical evidence from stock market returns in six countries shows that such a model outperforms traditional asymmetric ARCH equations.

If you experience problems downloading a file, check if you have the proper application to view it first. 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.

File URL: http://qed.econ.queensu.ca:80/jae/1997-v12.1/
File Function: Supporting data files and programs
Download Restriction: no

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 12 (1997)
Issue (Month): 1 (Jan.-Feb.)
Pages: 49-65

as
in new window

Handle: RePEc:jae:japmet:v:12:y:1997:i:1:p:49-65
Contact details of provider: Web page: http://www.interscience.wiley.com/jpages/0883-7252/

Order Information: Web: http://www3.interscience.wiley.com/jcatalog/subscribe.jsp?issn=0883-7252 Email:


No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:jae:japmet:v:12:y:1997:i:1:p:49-65. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.