Asymmetric index stock returns: evidence from the G-7
There is able empirical evidence that the conditional volatility of stock returns is asymmetric in the sense that negative innovations increase volatility more than positive innovations of an equal magnitude. Less attention, however, has been paid to possible asymmetries in the conditional mean. This paper uses time-varying asymmetric distributions to model index stock returns of the Group of Seven (G-7) industrialized nations. In agreement with the extant literature, all index stock returns exhibit asymmetric volatility. More importantly however, the conditional mean is also an asymmetric function of past innovations, in most cases. Interestingly, the asymmetry in the conditional mean case is the reverse of that observed in the conditional variance, that is, positive innovations have a greater impact than negative innovations of an equal sign. Equivalently, positive innovations (up markets) are more persistent than negative innovations (down markets). Overall, the evidence suggests that taking into account both size as well as the sign of past innovations can improve forecasts of the conditional first and second moments of stock returns.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 6 (1999)
Issue (Month): 12 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEL20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEL20|
When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:6:y:1999:i:12:p:817-820. 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: (Michael McNulty)
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.