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Asymmetric Nonlinear Smooth Transition Garch Models

  • Heather M. Anderson
  • Kiseok Nam
  • Farshid Vahid
Part of the Dynamic Modeling and Econometrics in Economics and Finance book series (DMEF, volume 1)

Abstract

Many studies of time varying volatility in stock markets have focused on an asymmetry in the volatility process known as “the leverage effect.” This asymmetry, first noted by Black in 1976, is characterized by the market’s asymmetric reaction to news, in the sense that stock market returns become more volatile after a negative price shock, than they do after a positive shock of the same absolute size. The first empirical models which explicitly attempted to capture the leverage effect include Engle’s (1990) A-GARCH model, Nelson’s (1991) E-GARCH model, and then the switching GARCH model proposed by Glosten, et al. (1993). Nowadays, there are many models which attempt to incorporate this asymmetry,1 and they are often conveniently summarized and compared using Engle and Ng’s (1993) “news impact curves,” which plot the predicted volatility response implied by a model, against past price shocks of given sign and size.

Keywords

Conditional Variance GARCH Model Price Shock Stock Market Return Leverage Effect 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Science+Business Media New York 1999

Authors and Affiliations

  • Heather M. Anderson
    • 1
  • Kiseok Nam
    • 1
  • Farshid Vahid
    • 1
  1. 1.Texas A&M UniversityUSA

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