Asymmetric volatility in equity markets around the world

Jone B. Horpestad, Štefan Lyócsa, Peter Molnár and Torbjørn B. Olsen

The North American Journal of Economics and Finance, 2019, vol. 48, issue C, 540-554

Abstract: The observation that price declines usually lead to volatility increases is known as the asymmetric volatility effect and has become a stylized fact about the financial markets. We study asymmetric volatility effect in 19 equity indices from North America, Latin America, Europe, Asia and Australia, utilizing not only daily data and four GARCH class models, but also realized volatility calculated from high-frequency data within HAR class models. We first confirm the stylized fact that stock market indices around the world exhibit the asymmetric volatility effect. This effect is stronger for US and European market indices. Second, we find that the asymmetric volatility effect is strong enough to significantly improve out-of-sample forecasts of an accurate HAR volatility model. Third, we show that forecast improvements of the asymmetric volatility models are largest during periods of higher market volatility, when accurate volatility forecasts matter the most.

Keywords: Asymmetric volatility; High-frequency; Realized volatility; HAR; GARCH; Forecasting (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062940817303984
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:48:y:2019:i:c:p:540-554

DOI: 10.1016/j.najef.2018.07.011

Access Statistics for this article

The North American Journal of Economics and Finance is currently edited by Hamid Beladi

More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().