Volatility Clustering, Leverage Effects, and Jumps Dynamics in Emerging Asian Equity Markets

47 Pages Posted: 8 Mar 2005

See all articles by Elton Daal

Elton Daal

University of New Orleans - College of Business Administration - Department of Economics and Finance

Atsuyuki Naka

University of New Orleans - College of Business Administration - Department of Economics and Finance

Jung-Suk Yu

School of Urban Planning & Real Estate Studies, Dankook University

Date Written: February 20, 2005

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: GARCH-jump models, jump predictability, volatility clustering, leverage effects, leptokurtosis

JEL Classification: C22, F31, G15

Suggested Citation

Daal, Elton and Naka, Atsuyuki and Yu, Jung-Suk, Volatility Clustering, Leverage Effects, and Jumps Dynamics in Emerging Asian Equity Markets (February 20, 2005). Available at SSRN: https://ssrn.com/abstract=676877 or http://dx.doi.org/10.2139/ssrn.676877

Elton Daal (Contact Author)

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States
504-280-6270 (Phone)

Atsuyuki Naka

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Jung-Suk Yu

School of Urban Planning & Real Estate Studies, Dankook University ( email )

152, Jukjeon-ro, Suji-gu, Yongin-si
Gyeonggi-do, 16890
Korea, Republic of (South Korea)

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