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Occurrence of long and short term asymmetry in stock market volatilities


  • Lönnbark, Carl

    () (Department of Economics, Umeå University)


We introduce the notions of short and long term asymmetric effects in volatilities. With short term asymmetry we mean the conventional one, i.e. the asymmetric response of current volatility to the most recent return shocks. However, there may be asymmetries in the way the effect of past return shocks propagate over time as well. We refer to this as long term asymmetry. We propose a model that enables the study of such a feature. In an empirical application using stock market index data we found evidence of the joint presence of short and long term asymmetric effects.

Suggested Citation

  • Lönnbark, Carl, 2012. "Occurrence of long and short term asymmetry in stock market volatilities," Umeå Economic Studies 848, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0848

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    References listed on IDEAS

    1. Schulmeister, Stephan, 2006. "The interaction between technical currency trading and exchange rate fluctuations," Finance Research Letters, Elsevier, vol. 3(3), pages 212-233, September.
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    4. Schulmeister, Stephan, 2009. "Profitability of technical stock trading: Has it moved from daily to intraday data?," Review of Financial Economics, Elsevier, vol. 18(4), pages 190-201, October.
    5. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
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    7. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    8. Taylor, Mark P. & Allen, Helen, 1992. "The use of technical analysis in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 11(3), pages 304-314, June.
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    11. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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    More about this item


    Financial econometrics; GARCH; memory; nonlinear; risk prediction; time series;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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