Empirical Analysis of Stock Returns and Volatility: Evidence from Seven Asian Stock Markets Based on TAR-GARCH Model

This paper investigates the time-series behavior of stock returns for seven Asian stock markets. In most cases, higher average returns appear to be associated with a higher level of volatility. Testing the relationship between stock returns and unexpected volatility, the evidence shows that four out of seven Asian stock markets have significant results. Further analyzing the relationship between stock returns and time-varying volatility by using Threshold Autoregressive GARCH(1,1)-in-mean specification indicates that the null hypothesis of no asymmetric effect on the conditional volatility is rejected for the daily data. However, the null cannot be rejected for the monthly data.     

Asymmetric Price and Volatility Adjustments in Emerging Asian Stock Markets

This paper tests the hypothesis that stock returns in emerging stock markets adjust asymmetrically to past information. The evidence suggests that both the conditional mean and the conditional variance respond asymmetrically to past information. In agreement with studies dealing with developed stock markets, the conditional variance is an asymmetrical function of past innovations, rising proportionately more during market declines. More importantly, the conditional mean is also an asymmetrical function of past returns. Specifically, positive past returns are more persistent than negative past returns of an equal magnitude. This behaviour is consistent with an asymmetric partial adjustment price model where news suggesting overpricing (negative returns) are incorporated faster into current prices than news suggesting underpricing (positive returns). Furthermore, the asymmetric adjustment of prices to past information could be partially responsible for the asymmetries in the conditional variance if the degree of adjustment and the level of volatility are positively related.     

Volatility Reversion and Correlation Structure of Returns in Major International Stock Markets

This paper investigates the stochastic behavior of weekly stock market returns in the U.S., Japan, and the U.K. during the period 1984 to 1994. The analysis is carried out using an augmented version of Bollerslev's [7] multivariate GARCH model with structural dummies to test for differences in the mean, volatility, and covariance structure of returns during the pre- and post-October 1987 crash periods. In addition, the paper explores the issue of the volatility reversion and time-varying behavior of correlation structure of returns in these markets. Mean-spillovers exist from the U.S. and Japan to the U.K. The magnitude of these spillovers is, however, low. Volatility spillovers exist from the U.S. and, to a lesser extent, from Japan to the U.K. Mean returns in all three markets and volatility in Japan and the U.K. are the same during the two periods, while volatility in the U.S. is lower during the post-crash period. With the exception of the correlation of returns between Japan and the U.K., which has doubled since the October 1987 crash, the remaining correlations are statistically similar during the two periods. Simulations performed indicate that volatility is reverting in the sense that, when it departs from its long-run equilibrium level, it tends to revert back to that level.     

Idiosyncratic Volatility Covariance and Expected Stock Returns

Given that the idiosyncratic volatility (IDVOL) of individual stocks co‐varies, we develop a model to determine how aggregate idiosyncratic volatility (AIV) may affect the volatility of a portfolio with a finite number of stocks. In portfolio and cross‐sectional tests, we find that stocks whose returns are more correlated with AIV innovations have lower returns than those that are less correlated with AIV innovations. These results are robust to controlling for the stock's own IDVOL and market volatility. We conclude that risk‐averse investors pay a premium for stocks that pay well when AIV is high, consistent with our model.     

Volatility Spillovers and Contagion During the Asian Crisis: Evidence from Six Southeast Asian Stock Markets

Using a multivariate generalized autoregressive conditional heteroskedasticity (GARCH-M) model, we investigate volatility spillovers in six Southeast Asian stock markets around the time of the 1997 Asian crisis. We focus on interactions with the U.S. market as a world financial market, and with the Japanese market as a regional financial market. We also use bivariate GARCH-M models to examine the behavior of individual markets and their interactions with other markets in the region. All models lend support to the idea of the "Asian contagion," which started in Thailand and rapidly spread to other markets.     

中国货币政策与股票横截面收益研究

本文基于沪深股市1993～2008年剔除了金融类股的所有A股数据,研究了中国证券市场上货币政策与股票横截面收益之间的关系。本文发现,在货币紧缩情况下,股票的Beta值与股票收益是成正比例关系的,而在货币扩张情况下,这种正比关系的程度减小,股票的Beta越大,其收益反而减小;在货币紧缩情况下,股票的市值规模与股票收益是成反比例关系的,而在货币扩张情况下,这种反比关系的程度变大,股票的市值规模越小,其收益增加的程度更大;在货币紧缩情况下,股票的账面市值比与股票收益是成正比例关系的,而在货币扩张情况下,这种正比关系的程度变大,股票的账面市值比越大,其收益增加的程度也越大。     

Implied Volatility in Options Markets and Conditional Heteroscedasticity in Stock Markets

This study examines whether or not the volatility of stock index returns forecasted by a GARCH-M specification is consistent with the implied volatility observed in options markets. Recent data for the New York Stock Exchange Composite Index and Standard & Poor's 500 Index and their options are employed. The patterns of the term structure of implied volatility are compared with those of volatility estimates obtained from the GARCH process. The results indicate that the GARCH process appears to partially explain the variation of implied volatilities and the term structure of implied volatilities.     

An Empirical Study of Volatility in Seven Southeast Asian Stock Markets Using ARV Models

This paper investigates the volatility persistence, volatility variability from day to day and transmission of volatility in seven Southeast Asian stock markets from 1980 to 1991 using the ARV approach. We found strong evidence that shocks to volatility are persistent in Taiwan. Moreover, the Stock Exchange of Thailand Daily Index has the strongest interday volatility fluctuation. Instantaneous causality of volatility among six of the seven markets (except Seoul) was discovered. Besides, there is significant volatility spillover effect from Hong Kong to Taiwan, Malaysia to Singapore and Singapore to Malaysia in the period 1980 to 1991.     

我国股市波动的信息不确定性与投资者行为效应研究

维护我国股票市场的功能与稳定,需要更多地考虑来自信息不确定性及投资者行为对股价波动的影响。应有计划、有步骤地适度扩容,进一步培育和发展我国股市的机构投资主体;货币政策应建立前瞻性的通货膨胀目标规则,并充分利用股价所包含的各类政策信息;应强化信息披露机制,建立上市公司强制分红制度,加强对投资者的信息交流与教育引导。     

Transmission of Stock Returns and Volatility between the U.S. and Japan: Evidence from the Stock Index Futures Markets

In this paper, we examine the nature of transmission of stock returns and volatility between the U.S. and Japanese stock markets using futures prices on the S&P 500 and Nikkei 225 stock indexes. We use stock index futures prices to mitigate the stale quote problem found in the spot index prices and to obtain more robust results. By employing a two-step GARCH approach, we find that there are unidirectional contemporaneous return and volatility spillovers from the U.S. to Japan. Furthermore, the U.S.'s influence on Japan in returns is approximately four times as large as the other way around. Finally, our results show no significant lagged spillover effects in both returns and volatility from the Osaka market to the Chicago market, while a significant lagged volatility spillover is observed from the U.S. to Japan. This revised version was published online in August 2006 with corrections to the Cover Date.     

Good Day Sunshine: Stock Returns and the Weather

Psychological evidence and casual intuition predict that sunny weather is associated with upbeat mood. This paper examines the relationship between morning sunshine in the city of a country's leading stock exchange and daily market index returns across 26 countries from 1982 to 1997. Sunshine is strongly significantly correlated with stock returns. After controlling for sunshine, rain and snow are unrelated to returns. Substantial use of weather‐based strategies was optimal for a trader with very low transactions costs. However, because these strategies involve frequent trades, fairly modest costs eliminate the gains. These findings are difficult to reconcile with fully rational price setting.     

人民币汇率波动与中国股票价格报酬之间的相关性——基于2005年至2007年的实证分析

本文以2005年7月21日至2007年9月18日的中国股价与人民币兑美元的名义汇率数据,利用GARCH模型来探讨在这段时间内人民币汇率波动对中国股票价格报酬的影响。实证结果得知,在这段时间内人民币兑美元名义汇率波动是负向影响中国股票价格报酬的,也符合有价证券余额理论的主张;汇率市场对股票市场的影响在宏观决策中应予以高度重视。     

Volatility Clustering, Asymmetry and Hysteresis in Stock Returns: International Evidence

Encompassing a very broad family of ARCH-GARCH models, we show that the AT-GARCH (1,1) model, where volatility rises more in response to bad newsthan to good news, and where news are considered bad only below a certain level, is a remarkably robust representation of worldwide stock market returns. The residual structure is then captured by extending ATGARCH (1,1) to an hysteresis model, HGARCH, where we modelstructured memory effects from past innovations. Obviously, this feature relates to the psychology of the markets and the way traders process information. For the French stock market we show that votalitity is affected differently, depending on the recent past being characterized by returns all above or below a certain level. In the same way a longer term trend may also influence volatility. It is found that bad news are discounted very quickly in volatility, this effect being reinforced when it comes after a negative trend in the stock index. On the opposite, good news have a very small impact on volatility except when they are clustered over a few days, which in this case reduces volatility.     

Time Variations and Covariations in the Expectation and Volatility of Stock Market Returns

This article investigates empirically the comovements of the conditional mean and volatility of stock returns. It extends the results in the literature by demonstrating the role of the commercial paper—Treasury yield spread in predicting time variation in volatility. The conditional mean and volatility exhibit an asymmetric relation, which contrasts with the contemporaneous relation that has been tested previously. The volatility leads the expected return, and this time series relation is documented using offset correlations, short-horizon contemporaneous correlations, and a vector autoregression. These results bring into question the value of modeling expected returns as a constant function of conditional volatility.     

特质风险与市场收益动态关系的实证研究

本文使用流通市值加权的股票平均波动率作为股票市场未分散特质风险的间接衡量指标,对A股市场特质风险与市场预期收益之间的动态关系进行研究。有别于国内已有研究,本文使用流通市值加权股票平均波动率的自回归残差项作为回归模型的解释变量,避免了解释变量高度持续性特征给回归结果造成的不利影响,发现A股市场未分散的特质风险对预期市场超额收益具有预测能力,两者呈正相关关系,这种预测能力在考虑市场分割、流动性、经济周期以及不同特质风险度量方法后依然存在。     

Volatility Spillovers Between Stock Returns and Exchange Rate Changes: International Evidence

We investigate interdependencies between stock returns and exchange rate changes for six industrialised countries, namely the US, the UK, Japan, Germany, France and Canada, by testing for volatility spillovers using a bivariate EGARCH model. Volatility spillovers from stock returns to exchange rate changes are found for all countries except Germany. These spillovers are symmetric in nature. No evidence is found of volatility spillovers from exchange rate changes to stock returns for any country. Spillovers from stock returns to exchange rate changes have increased since October 1987. This finding is consistent with the notion that international financial markets have become increasingly integrated.     

Regulation Change and Volatility Spillovers: Evidence from China's Stock Markets

This paper investigates the structural changes of volatility spillovers between Chinese A-share and B-share markets induced by a regulation change on February 19, 2001, that allowed Chinese domestic investors to trade in the B-share market. The empirical results of the study, using high-frequency intraday data collected from a sample of seventy-eight firms issuing both A-shares and B-shares and employing a bivariate generalized autoregressive conditional heteroskedasticity (GARCH) model, show that after the regulation change, the volatility in A-shares increases the volatility in B-shares, thus increasing the risk of the whole market, whereas the latter reduces the former, thus reducing the risk of the whole market. A further investigation of the determinants influencing these structural changes shows that the following factors can encourage structural changes that reduce overall market risk: government ownership, institutional ownership, firm size, B-share proportion, and market-to-book ratio. Conversely, the following factors can encourage structural changes that increase overall market risk: dual roles of chief executive officer and chairman and the joint effect of firm size and B-share proportion.     

成交量和回报率对信息扰动的市场反应研究——以中国A股市场为例

用BVAR和BMAR模型及脉冲—响应分析方法来考察中国股票市场上成交量和回报率对信息扰动的动态反应情况得出,公共扰动和永久性扰动是回报率的主要决定因素,而非公共扰动和暂时性扰动则是成交量的主要决定因素。但是公共扰动和永久性扰动对成交量有明显影响;非公共扰动和暂时性扰动对回报率有明显影响。