SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

Abstract: This paper investigates the presence of asymmetric GARCH effects in a number of equity return series, and compare the modeling performance of seven different conditional variance models, within the parametric GARCH class of models. The data consists of daily returns for 45 Nordic stocks, during the period July 1991 to July 1996. The models investigated are: EGARCH, GJR, TGARCH, A- PARCH, GQARCH, VS-ARCH, and LSTGARCH. In all these models the conditional variance is a function of the sign of lagged residuals. Thus, the models can capture the often reported negative correlation between lagged returns and conditional variance. In the paper I also introduce three new procedures for asymmetry testing. The proposed LM tests, which are based on the results of Wooldridge [1991], allow for heterokurtosis under the null. Asymmetries are detected for only 12 of the 45 series. The specifications GJR, TGARCH, and GQARCH appear to be superior for modeling the dynamics of the conditional variance. Furthermore, I show that the use of robust test statistics is advisable.

Keywords: GARCH; asymmetry; equity returns; model evaluation

JEL-codes: C12; C13; C22; C52

26 pages, March 1997

Full text files

hastef0164.dvi  

hastef0164.ps PostScript file 

hastef0164.ps.zip PostScript file 

hastef0164.pdf  

hastef0164.pdf.zip  

Download statistics

• Stockholm School of Economics
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:hastef:0164This page generated on 2024-09-13 22:19:41.