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Autoregressive Conditional Heteroskedasticity Models and the Dynamic Structure of the Athens Stock Exchange

  • Margiora, Philippa
  • Panaretos, John

Autoregressive Conditional Heteroskedasticity (ARCH) models have been applied in modeling the relation between conditional variance and asset risk premium. The most important theoretical regularities that govern the dynamic structure of financial time series are presented. A model named Exponential E-GARCH in Mean tests their validity in Athens Stock Exchange. The model fits well in Greek Stock Market, from 31 July 1987 to 30 July 1999, and provides empirical evidence on theoretical regularities. We find evidence for the existence of a positive trade-off (possible non-linear) between stock returns and volatility, the absence of “leverage effects”, the thick tailed stock returns distribution, the slower rate information accumulation when the market is closed than when it is open, the existence of positive non-synchronous trading effects and the existence of a long-term memory pattern in stock returns.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6358.

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Date of creation: 2001
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Handle: RePEc:pra:mprapa:6358
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  1. French, Kenneth R. & Roll, Richard, 1986. "Stock return variances : The arrival of information and the reaction of traders," Journal of Financial Economics, Elsevier, vol. 17(1), pages 5-26, September.
  2. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
  3. Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993. "On the relation between the expected value and the volatility of the nominal excess return on stocks," Staff Report 157, Federal Reserve Bank of Minneapolis.
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  13. repec:att:wimass:9002 is not listed on IDEAS
  14. French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, vol. 19(1), pages 3-29, September.
  15. Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
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  18. Zakoian, Jean-Michel, 1994. "Threshold heteroskedastic models," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 931-955, September.
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