The Impact of News on Higher Moments
In this paper, we extend the concept of News Impact Curve developed by Engle and Ng (1993) to the higher moments of the multivariate returns' distribution, thereby providing a tool to investigate the impact of shocks on the characteristics of the subsequent distribution. For this purpose, we present a new methodology to describe the joint distribution of returns in a non-normal setting. This methodology allows to gain a better understanding of the temporal evolution of the returns' distribution and can be used to analyze the behavior of the optimal portfolio distribution. We apply our methodology to provide stylized facts on the four largest international stock markets. In particular, we document the persistence in large (positive or negative) daily returns. In a multivariate setting, we find that foreign holdings provide a good hedge against changes in domestic volatility after good shocks but a bad hedge after crashes.
|Date of creation:||Nov 2006|
|Contact details of provider:|| Web page: http://www.SwissFinanceInstitute.ch|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:chf:rpseri:rp0628. 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: (Marilyn Barja)
If references are entirely missing, you can add them using this form.