WIT Press


Seasonal Asymmetric Persistence In Volatility: An Extension Of GARCH Models

Price

Free (open access)

Paper DOI

10.2495/CF040221

Volume

38

Pages

9

Published

2004

Size

346 kb

Author(s)

V. Terraza

Abstract

In this paper, we study non-linear dynamics in the CAC 40 stock index. Our empirical results suggest combining seasonality, persistence and asymmetric effects to model the conditional volatility. We observe that seasonality can have an asymmetric impact on the volatility. In particular, we show that negative shocks observed on Mondays have a greater impact on the volatility than the other days. Then we construct a seasonal asymmetric GARCH model. It consists of adding seasonal terms in the variance equation of a GJR-GARCH (1,1) model. Keywords: non linearity, conditional volatility, asymmetry, seasonal processes, GJR-GARCH model. 1 Introduction Mandelbrot [19] and Fama [10] both reported evidence that large (small) changes in the price are often followed by other large (small) changes. This autocorrelation of the volatility of returns was modeled by Engle [9] within t

Keywords