Occurrence of long and short term asymmetry in stock market volatilities

Carl Lönnbark ()
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Carl Lönnbark: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 848, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: 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.

Keywords: Financial econometrics; GARCH; memory; nonlinear; risk prediction; time series (search for similar items in EconPapers)
JEL-codes: C22 C51 C58 G15 G17 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2012-10-03
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-fmk and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:umnees:0848

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