Asymmetrical reaction to US stock-return news: evidence from major stock markets based on a double-threshold model |
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Authors: | Cathy W S Chen Thomas C Chiang Mike K P So |
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Institution: | a Department of Statistics, Feng Chia University, Taichung, Taiwan;b Department of Finance, Drexel University, 3141 Chestnut Street, Philadelphia, PA 19104, USA;c Hong Kong University of Science and Technology, Hong Kong, China |
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Abstract: | This paper examines the hypothesis that both stock returns and volatility are asymmetrical functions of past information from the US market. By employing a double-threshold GARCH model to investigate six major index-return series, we find strong evidence supporting the asymmetrical hypothesis of stock returns. Specifically, negative news from the US market will cause a larger decline in a national stock return than an equal magnitude of good news. This holds true for the volatility series. The variance appears to be more volatile when bad news impacts the market than when good news does. |
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Keywords: | Asymmetry Threshold GARCH Volatility MCMC methods |
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