Asymmetry with respect to the memory in stock market volatilities

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

No 849, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: The empirically most relevant stylized facts when it comes to modeling time varying financial volatility are the asymmetric response to return shocks and the long memory property. Up till now, these have largely been modeled in isolation though. To more flexibly capture asymmetry also with respect to the memory structure we introduce a new model and apply it to stock market index data. We find that, although the effect on volatility of negative return shocks is higher than for positive ones, the latter are more persistent and relatively quickly dominate negative ones.

Keywords: Financial econometrics; GARCH; news impact; nonlinear; risk prediction; time series (search for similar items in EconPapers)
JEL-codes: C12 C51 C58 G10 G15 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2012-10-03
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-fmk, nep-mst and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:umnees:0849

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