Search

This article proposes a general framework of a Markov Switching GARCH model with a mixture of truncated Gaussian to model asset returns with price limits in China. Theoretically, while retaining many convenient statistical properties of the Gaussian distribution, the proposed model also assumes a flexible time-varying volatility structure to accommodate the feature of the return data under price restrictions in China, such as the clusters near the bounds (due to the 'bound effect'). Empirically, we apply the model to eight representative stocks from Shanghai and Shenzhen stock markets in China. Lastly, we find that our proposed model dominates the conventional volatility models in terms of Value-at-Risk measures. [ABSTRACT FROM AUTHOR]

The article presents an empirical investigation into the permanent income hypothesis taking evidence from the Canadian data. The objective of the paper is to investigate whether aggregate consumption in postwar Canada shares similar features to the findings for the U.S. Recently, researchers J.Y. Campbell and G.N. Mankiw (CM) have demonstrated that most empirical findings in the aggregate consumption literature can be explained by a simple model in which some fraction of income accrues to individuals who consume their current income each period and the remainder accrues to individuals whose consumption behaviour is predicted by the consumption-based asset pricing model. For the U.S. data, researchers report that the fraction of income going to current income consumers is in the range of 35 to 50%. The paper departs on several points from CM study in which the first-order condition is linearized by essentially assuming that the joint distribution of asset returns and consumption is conditionally lognormal and homoscedastic.