Beta Asymmetry in the Global Stock Markets Following the Subprime Mortgage Crisis

Yung-Shi Liau

Emerging Markets Finance and Trade, 2016, vol. 52, issue 9, 2195-2207

Abstract: I set out in this study to examine the asymmetry in beta responses using the dynamic conditional correlation threshold generalized autoregressive conditional heteroskedasticity (DCC-GJR-GARCH) model. The empirical results reveal that asymmetry is discernible in both volatility and betas in the global stock markets. Furthermore, when leverage is linked with the price-to-book ratio, the results indicate that the beta asymmetry is attributable to the leverage effect. The results of this study also reveal that the declines in the price-to-book ratio following the subprime mortgage crisis have led to an overall increase in betas.

Date: 2016
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DOI: 10.1080/1540496X.2015.1068613

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