 Asymmetric index stock returns: evidence from the G-7Gregory Koutmos Applied Economics Letters, 1999, vol. 6, issue 12, 817-820 Abstract: There is able empirical evidence that the conditional volatility of stock returns is asymmetric in the sense that negative innovations increase volatility more than positive innovations of an equal magnitude. Less attention, however, has been paid to possible asymmetries in the conditional mean. This paper uses time-varying asymmetric distributions to model index stock returns of the Group of Seven (G-7) industrialized nations. In agreement with the extant literature, all index stock returns exhibit asymmetric volatility. More importantly however, the conditional mean is also an asymmetric function of past innovations, in most cases. Interestingly, the asymmetry in the conditional mean case is the reverse of that observed in the conditional variance, that is, positive innovations have a greater impact than negative innovations of an equal sign. Equivalently, positive innovations (up markets) are more persistent than negative innovations (down markets). Overall, the evidence suggests that taking into account both size as well as the sign of past innovations can improve forecasts of the conditional first and second moments of stock returns. Date: 1999 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:6:y:1999:i:12:p:817-820 Ordering information: This journal article can be ordered from Access Statistics for this article Applied Economics Letters is currently edited by Anita Phillips More articles in Applied Economics Letters from Taylor & Francis Journals |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.