A REGRESSION BASED APPROACH TO CAPTURING THE LEVEL DEPENDENCE IN THE VOLATILITY OF STOCK RETURNS
Journal Title: Asian Economic and Financial Review - Year 2016, Vol 6, Issue 12
Abstract
In this paper, we propose an alternative approach to work with the new covariance estimator Cov Ratio based on daily high-low prices that we had put forth in an earlier study (Lakshmi and Maheswaran, 2016). Using the GARCH (1, 1) and IGARCH (1, 1) models, we empirically examine four major stock indices, namely: NIFTY, S&P500, DAX and FTSE100 for the sample period ranging from 1st January 1996 to 30th March 2015. We find that the estimator is upward biased for all the indices under study. Furthermore, we find that there are no residual ARCH effects in these models. In the earlier study, we had proved that random walk behavior cannot explain this overreaction in stock returns. Therefore, we had attributed this phenomenon to the level dependence in the volatility of stock returns. In this study, we find that it is the same Constant Elasticity of Variance (CEV) effect that comes into play here that makes the estimator upward biased as seen in the data.
Authors and Affiliations
Lakshmi Padmakumari*| Institute for Financial Management and Research, 24, Kothari Road, Nungambakkam, Chennai, India, S Maheswaran| Institute for Financial Management and Research, 24, Kothari Road, Nungambakkam, Chennai, India
Keywords
Related Articles
- EP ID EP2314
- DOI -
- Views 567
- Downloads 34
ENHANCING EMPLOYEE PERFORMANCE IN NIGERIA THROUGH EFFICIENT TIME MANAGEMENT FRAMEWORKS
In developing countries like Nigeria, the need for time management in organizations cannot be over emphasized. Time management helps in achieving individual and organizational goals in view of the limited amount of time...
SUSTAINABLE GROWTH AND FIRM RISK FROM THE SIGNALING PERSPECTIVE
This study attempts to examine the relevance of sustainable growth and its influence on firm’ financial and business risks and Compare the relative information content of them. Based on sampling, 85 firms from Tehran Sto...
RELATIONSHIP BETWEEN TOURISM AND ECONOMIC GROWTH: A PANEL GRANGER CAUSALITY APPROACH
This paper investigated the causal relationship between tourism revenue and gross domestic product (GDP) using the panel data of 135 countries for the period 1995–2008. For this purpose, Panel Granger causality analysis...
THE IMPACTS OF THE QUALITY OF THE ENVIRONMENT AND NEIGHBOURHOOD AFFLUENCE ON HOUSING PRICES: A THREE - LEVEL HIERARCHICAL LINEAR M ODEL APPROACH
This paper employs a three-level hierarchical linear model (HLM) to examine the impacts that the quality of the environment and neighbourhood affluence have on housing prices. The empirical results suggest that there are...
AN APPRAISAL OF PERSONAL INCOME TAX EVASION IN NIGERIA
The objective of this study is to appraise the evasion of personal income tax in Nigeria. A total of 160 questionnaires were administered to some selected self-employed individuals in Edo State comprising businessmen, co...