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Asymmetric Volatility in Emerging and Mature Markets

Shamila A. Jayasuriya, Ohio University, Department of Economics, Bentley Annex 325, Athens, OH 45701, U.S.A.

William Shambora

William Shambora, Ohio University, Department of Economics, Bentley Annex 335 Athens, OH 45701, U.S.A.

Rosemary Rossiter

Rosemary Rossiter, Ohio University, Department of Economics, Bentley Annex 357 Athens, OH 45701, U.S.A.

In his Nobel Laureate lecture Engle notes that asymmetric volatility has a significant impact on risk. In this article equity market volatility is estimated using an asymmetric power-GARCH model which nests many other popular models. We estimate the magnitude of asymmetric volatility for several emerging and mature markets for three sub-periods. Many mature markets exhibit large magnitudes of asymmetric volatility and several emerging markets do so as well. The magnitude of asymmetry varies by sub-period and is consistent with the suggestion in Campbell and Hentschel (1992) that asymmetry is greater when markets are more volatile.

Key Words: Asymmetric volatility • emerging markets • asymmetric power-GARCH • JEL Classification: G100 • JEL Classification: G190

Journal of Emerging Market Finance, Vol. 8, No. 1, 25-43 (2009)
DOI: 10.1177/097265270900800102


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