Modelling asymmetric market volatility with univariate GARCH models: Evidence from Nasdaq-100

Fuzuli Aliyev, Richard Ajayi and Nijat Gasim

The Journal of Economic Asymmetries, 2020, vol. 22, issue C

Abstract: This paper models and estimates the volatility of nonfinancial, innovative and hi-tech focused stock index, the Nasdaq-100, using univariate asymmetric GARCH models. We employ EGARCH and GJR-GARCH using daily data over the period January 4, 2000 through March 19, 2019. We find that the volatility shocks on the index returns are quite persistent. Furthermore, our findings show that the index has leverage effect, and the impact of shocks is asymmetric, whereby the impacts of negative shocks on volatility are higher than those of positive shocks of the same magnitude. The financial implication of the findings for investors is that Nasdaq-100 index returns’ volatility exhibits clustering, and this permits investors to establish future positions in expectation of this characteristic.

Keywords: Asymmetry; Volatility; Nasdaq-100; GARCH models; Leverage effect (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:22:y:2020:i:c:s1703494920300141

DOI: 10.1016/j.jeca.2020.e00167

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