Long-term effects of the asymmetry and persistence of the prediction of volatility: Evidence for the equity markets of Latin America

Raúl de Jesús Gutiérrez (), Edgar Ortiz () and Oswaldo García Salgado
Additional contact information
Raúl de Jesús Gutiérrez: Universidad Autónoma del Estado de México, México
Oswaldo García Salgado: Universidad Autónoma del Estado de México, México

Contaduría y Administración, 2017, vol. 62, issue 4, 1081-1099

Abstract: This article proposes an extension to the CGARCH model in order to capture the characteristics of short-run and long-run asymmetry and persistence, and examine their effects in modeling and forecasting the conditional volatility of the stock markets from the region of Latin America during the period from 2 January 1992 to 31 December 2014. In the sample analysis, the estimation results of the CGARCH-class model family reveal the presence of short-run and long-run significant asymmetric effects and long-run persistency in the structure of stock price return volatility. The empirical results also show that the use of symmetric and asymmetric loss functions and the statistical test of Hansen (2005) are sound alternatives for evaluating the predictive ability of the asymmetric CGARCH models. In addition, the inclusion of long-run asymmetry and long-run persistency in the variance equation improves significantly the out of sample volatility forecasts for emerging stock markets of Argentina and Mexico.

Keywords: Asymmetric volatility; Emerging stock markets; Symmetric and asymmetric loss functions; Superior predictive ability test (search for similar items in EconPapers)
JEL-codes: C22 C32 C51 C52 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.cya.unam.mx/index.php/cya/article/view/1684/1157 (application/pdf)

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:nax:conyad:v:62:y:2017:i:4:p:1081-1099

Access Statistics for this article

Contaduría y Administración is currently edited by Francisco López-Herrera (Editors in Chief)

More articles in Contaduría y Administración from Accounting and Management Contact information at EDIRC.
Bibliographic data for series maintained by Alberto García-Narvaez (Technical Editor) ().