No News is Good News: An Asymmetric Model of Changing Volatility in Stock Returns
Ludger Hentschel and
John Campbell ()
Scholarly Articles from Harvard University Department of Economics
It seems plausible that an increase in stock market volatility raises required stock returns, and thus lowers stock prices. We develop a formal model of this volatility feedback effect using a simple model of changing variance (a quadratic generalized autoregressive conditionally heteroskedastic, or QGARCH, model). Our model is asymmetric and helps to explain the negative skewness and excess kurtosis of U.S. monthly and daily stock returns over the period 1926â€“1988. We find that volatility feedback normally has little effect on returns, but it can be important during periods of high volatility.
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Published in Journal of Financial Economics
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Journal Article: No news is good news *1: An asymmetric model of changing volatility in stock returns (1992)
Working Paper: No News is Good News: An Asymmetric Model of Changing Volatility in Stock Returns (1991)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:3220232
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