Forecasting Performance of Asymmetric GARCH in Stock Market Volatility Models: Relative Potency of EGARCH and PGARCH Models

Godwin Chigozie Okpara and Nzeadibe Okechukwu Henry
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Godwin Chigozie Okpara: Department of Banking and Finance, Abia State University Uturu
Nzeadibe Okechukwu Henry: Department Economics, College of Education Arochukwu

International Journal of Research and Innovation in Applied Science, 2025, vol. 10, issue 2, 663-674

Abstract: Asymmetric volatility phenomenon is a market dynamic which shows that there are higher market volatility levels in market downswings (negative shocks) than in market upswings (positive shocks). It implies that volatility tends to increase in response to bad news and decrease in response to good news (Okpara, 2016). In other words, the presence of asymmetric volatility is mostly apparent during stock market crisis when a large decline in stock price is associated with a significant increase in market volatility (Wu 2001). This implies that negative surprises have a much greater effect on volatility than do positive ones. This situation is commonly associated with the financial market where ‘bad news’ (negative shocks) is found to have larger impact on volatility than good news (positive shocks) of the same magnitude.

Date: 2025
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