ASYMMETRIC INFORMATION IMPACTS: EVIDENCE FROM THE AUSTRALIAN TREASURY‐BOND FUTURES MARKET

Liping Zou, Lawrence Rose and John Pinfold

Pacific Economic Review, 2007, vol. 12, issue 5, 665-681

Abstract: Abstract. The effect of information flows on the return volatility of Australian 3‐year Treasury bond futures is examined using linear and non‐linear GARCH models. Results show significant asymmetric information effects, where bad news has a greater impact on volatility than good news and a non‐linear Threshold ARCH(1,1) in mean model provides the most accurate estimation of return volatility. Diagnostic tests confirm this finding and out of sample forecasting error statistics verify that the Threshold ARCH(1,1) in mean model yields the lowest forecasting error. The Threshold ARCH(1,1)‐M model is best at capturing the asymmetric information impact on the Australian three‐year T‐Bond futures return volatility.

Date: 2007
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