Announcement Effects and Asymmetric Volatility in Industry Stock Returns: Evidence from Taiwan

Chih-Wei Lee and Ming-Jen Chang

Emerging Markets Finance and Trade, 2011, vol. 47, issue 2, 48-61

Abstract: This study employs financial econometric models to examine the asymmetric volatility of equity returns in response to monetary policy announcements in the Taiwanese stock market. The meetings of the board of directors at the Central Bank of the Republic of China (Taiwan) are considered for testing the announcement effects. The asymmetric generalized autoregressive conditional heteroskedasticity (GARCH) model and the smooth transition autoregression with GARCH model are used to measure equity returns' asymmetric volatility. We conclude that the asymmetric volatility of countercyclical equity returns can be identified. Our findings support the >i>leverage effect>/i> of stock price changes for most industry equity returns in Taiwan.

Keywords: announcement effects; asymmetric volatility; stock returns; Taiwan Stock Exchange (search for similar items in EconPapers)
Date: 2011
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