Stock market dynamics in a regime-switching asymmetric power GARCH model |
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Authors: | Thierry Ané Loredana Ureche-Rangau |
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Institution: | a University of Reims, 57 bis rue Pierre Taittinger, 51096 Reims Cedex, France b IESEG School of Management, 3 rue de la Digue, 59800 Lille, France |
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Abstract: | This paper analyzes the dynamics of Asian stock index returns through a Regime-Switching Asymmetric Power GARCH model (RS-APGARCH). The model confirms some stylized facts already discussed in former studies but also highlights interesting new characteristics of stock market returns and volatilities. Mainly, it improves the traditional regime-switching GARCH models by including an asymmetric response to news and, above all, by allowing the power transformations of the heteroskedasticity equations to be estimated directly from the data. Several mixture models are compared where a first-order Markov process governs the switching between regimes. |
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Keywords: | C13 C52 G15 |
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