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Volatility clustering, leverage effects, and jumps dynamics in emerging Asian equity markets

Elton Daal, Atsuyuki Naka and Jung-Suk Yu ()
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Elton Daal: University of New Orleans
Atsuyuki Naka: University of New Orleans

No 2004-05, Working Papers from University of New Orleans, Department of Economics and Finance

Abstract: This paper proposes a mixed GARCH-Jump model that is tailored to the specific circumstances arising in emerging equity markets. Our model accommodates lagged currency returns as a local information variable in the autoregressive jump intensity function, incorporates jumps in the returns and volatility, and allows volatility to respond asymmetrically to both normal innovations and jump shocks. The model captures the distinguishing features of the Asian index returns and significantly improves the fit for those markets that were affected by the 1997 Asian crisis. Our proposed model yields higher levels of conditional kurtosis and superior forecasts of the expected arrival rate of jumps.

Keywords: Jumps; Volatility; Leverage effects; Emerging markets; Asia; Equity markets (search for similar items in EconPapers)
JEL-codes: C22 F31 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets, nep-fin, nep-fmk and nep-sea
Date: 2004-09-30
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