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This study estimated Asymmetric generalized autoregressive conditional heteroscadasticity models with endogenous break dummy on two innovation assumptions using daily all share index of Nigeria, Kenya, United States, Germany, South Africa and China spanning from February 14, 2000 to February 14, 2013. The best fitted models are compared in terms of conditional volatility reaction to market shocks and volatility persistence alongside the asymmetric properties. The results reveal that volatility of Nigeria and Kenya stock returns react to market shock faster than as other countries do. The results also suggest the absence of leverage effect in Nigeria and Kenya stock returns, but confirm its existence in others. In conclusion, the paper suggested that less developed stock markets should improve on market infrastructure, quality of instrument traded on the floor and regulatory practices as such efforts could moderate its fast response to market fluctuations.

This essay investigates three different GARCH-models (GARCH, EGARCH and GJR-GARCH) along with two distributions (Normal and Student’s t), which are used to forecast the Value at Risk (VaR) for different return series. Seven major international equity indices are examined. The purpose of the essay is to answer which of the three models that is better at forecasting the VaR and which distribution is more appropriate. The results show that the EGARCH(1,1) is preferred for all indices included in the study.

Tese de mestrado em Matemática Financeira, apresentada à Universidade de Lisboa, através da Faculdade de Ciências, 2015 Submitted by Cristina Manessiez (camanessiez@fc.ul.pt) on 2015-11-23T16:42:42Z No. of bitstreams: 1 ulfc114263_tm_Ana_Filipa_Ferreira.pdf: 2160590 bytes, checksum: f73626831e806e47efeaa8983f6a9227 (MD5) Made available in DSpace on 2015-11-23T16:42:52Z (GMT). No. of bitstreams: 1 ulfc114263_tm_Ana_Filipa_Ferreira.pdf: 2160590 bytes, checksum: f73626831e806e47efeaa8983f6a9227 (MD5) Previous issue date: 2015

Namibia introduced the “Small Stock Marketing Scheme” (SSMS) in 2004 which replaced 15% export duty on live sheep exports to South Africa with progressively demanding quantitative restrictions. This policy increased price volatility in the Namibian sheep market. We used relevant monthly price data and employed EGARCH modeling to determine if price volatility spilled-over from the sheep market in Namibia to South African sheep market. About 71 percent of the volatility in the Namibian sheep market is transmitted to the retail market in South Africa and the transmitted volatility remains persistent.

Maģistra darbā ir veikta analīze par akciju volatilitātes transmisijas mehānismu laikā pieciem lielākajiem pēc pārdošanas apjoma informāciju tehnoloģiju un servisa uzņēmumiem Eiropā un pieciem šādiem uzņēmumiem ASV, izmantojot GARCH saimes modeļus. Darba empīriskajā daļā tiek izmantoti dati par laika periodu 01.01.2002. - 23.02.2015., un veidoti GARCH, TGARCH, EGARCH modeļi ar dažādām p un q kārtām, lai noskaidrotu modeli, kurš precīzāk spēj prognozēt akciju ienesīguma volatilitāti. Rezultāti liecina, ka parauga ietvaros veiktajai prognozēšanai Eiropas uzņēmumiem labākie ir EGARCH un GARCH modeļi, bet ASV uzņēmumiem – TGARCH un EGARCH. Savukārt veicot prognozi ārpus parauga, Eiropas uzņēmumiem labākais ir GARCH, bet ASV uzņēmumiem - TGARCH un GARCH modeļi., The master thesis provides an analysis about transmission mechnism of asset returns' volatility for five largest (by sales) information technology and service companies in USA and five companies un Europe. GARCH models are used for this purpose. Empirical part of this study covers data for period from 01.01.2002. to 23.02.2015.. Various GARCH, TGARCH, EGARCH modells with different p un q orders were made in order to find out which model shows best performance to forecast volatility of asset returns. Results show that in-sample forecasting best model for companies from Europe were EGARCH and GARCH models, for USA – TGARCH and EGARCH. In out-of-sample forecasting GARCH model showed the best performance among compareded models for companies from Europe, but TGARCH and GARCH models were the best in case of USA.

This paper analyzes the impact of German macroeconomic news announcements on the Czech financial market - as proxied by EUR/CZK exchange rate returns - over three sub-periods: the financial crisis period (2008-2009), the post-crisis period (2010-11/2013) and the currency intervention period (11/2013-2014). Both symmetric and asymmetric models from the class of generalized autoregressive conditional heteroscedasticity (GARCH) models are applied. Macroeconomic shocks (GDP, ZEW, IFO, factory orders, industrial production, Purchasing manager's indexes (PMI) from service and production sectors) are constructed as deviations form expected values. The results suggest that announcement of German GDP and IFO index calm the exchange rate volatility during the 7-year total examined time period. Splitting the time series into 3 individual sub-periods the results suggest that announcements of GDP, factory orders decrease and announcements of industrial production, IFO index increase the conditional volatility during financial crises. Furthermore, announcements of GDP and ZEW index calm the exchange rate's conditional volatility during the post-crises period. Finally, announcements of GDP data and PMI index form production sector increase conditional variance during the central bank's currency interventions. Moreover, announcement of higher IFO index depreciates the CZK value during the post-crisis period.

This work presents an investigation on whether investments in Gold can serve as a hedge against the depreciation in currencies. The long term relationship between Gold price and the Japanese Yen per US Dollar, British Pound per US Dollar and South African Rand per US Dollar exchange rate was investigated using monthly data on Gold price and the three Dollar exchange rates. Results from the AR(2) and the EGARCH(1,2) models suggests that there is a typical inverse relationship between Gold price and the three exchange rates. This relationship differed among the three currencies. The strongest relationship was observed in the British Pound exchange rate, making the Pound the strongest hedge among the three considered currencies.

This paper studies the reaction of the conditional mean and volatility of the euro-dollar exchange rate to statements by European Central Bank and national central bank officials. We focus on comments on monetary policy and the external value of the euro. We find that the Bundesbank has dominated the news coverage. We conclude that ECB statements have mainly influenced conditional volatility. In some cases there are effects of statements on the conditional mean of the euro-dollar exchange rate. Efforts to talk up the euro have generally not been successful. There is also evidence of asymmetric reactions to news. (c) 2004 Elsevier Ltd. All rights reserved.

This article shows that the relationship between kurtosis, persistence of shocks to volatility, and first-order autocorrelation of squares is different in GARCH and ARSV models. This difference can explain why, when these models are fitted to the same series, the persistence estimated is usually higher in GARCH than in ARSV models, and, why gaussian ARSV models seem to be adequate, whereas GARCH models often require leptokurtic conditional distributions. We also show that introducing the asymmetric response of volatility to positive and negative returns does not change the conclusions. These results are illustrated with the analysis of daily financial returns. Publicado

Neste estudo aplicaram-se os modelos ARCH a volatilidade do prémio de risco do mercado de acções português no período 1993 a 2001, em bases diária e mensal. Constatou-se o melhor desempenho do modelo GARCH comparativamente aos ARCH e EGARCH. As rendibilidades diárias permitiram uma melhor performance do que as mensais. No subperíodo de 1997 a 2001, constatou-se existência de estacionaridade da variância, o que não aconteceu com a série global. Com base no modelo GARCH(l,1) aplicado a esse subperíodo fez-se uma previsão da volatilidade para os dias seguintes ao termo das observações.

The reaction of EU bond and equity market volatilities to sovereign rating announcements (Standard & Poor’s, Moody’s, and Fitch) is investigated using a panel of daily stock market and sovereign bond returns. The parametric volatilities are defined using EGARCH specifications. The estimation results show that upgrades do not have significant effects on volatility, but downgrades increase stock and bond market volatility. Contagion is present, and sovereign rating announcements create interdependence among European financial markets with upgrades (downgrades) in one country leading to a decrease (increase) in volatility in other countries. The empirical results show also a financial gain and risk (valueat- risk) reduction for portfolio returns when taking into account sovereign credit ratings’ information for volatility modelling, with financial gains decreasing with higher risk aversion. info:eu-repo/semantics/publishedVersion

This study examines the effects that Contracts for Difference (CFDs) have had on the Australian equity market, either as an accelerant for mispricing, or as a source of increased market functionality through the addition of a new tradable product and increased liquidity. The Australian Securities Exchange (ASX) made the decision to segregate CFDs to a separate ring-fenced exchange in November 2007. This study uses EGARCH techniques to test for the effects of CFDs on return volatility at the time of CFD inclusion and segregation in Australian equity markets at the index and equity-specific level. A fully worked explanation and example of a CFD-influenced ‘overhang’ is also provided. The results provide evidence that cannot reject the presence of ‘overhangs’ in Australian equity markets.

El siguiente proyecto de tesis pretende mostrar y verificar cómo las redes neuronales, en concreto, la red backpropagation son una alternativa para la predicción de la volatilidad condicional frente a los modelos econométricos clásicos de la familia GARCH. El estudio se realiza para diferentes índices bursátilies de diferentes tamaños y zonas geográficas, así como para datos tanto diarios como de alta frecuencia utilizando para la comparativa uno de los modelos más extendidos para el estudio de la volatildiad condicional en índices bursátiles como el EGARCH, dada la existencia comprobada de asimetrías en la volatildiad de dichos índices. La elección de la red neuronal backpropagation viene motivada por ser una de las redes neuronales más extendidas en su uso en finanzas por su capacidad de generalización método de aprendizaje basada en la relga delta generalizada., Oliver Muncharaz, J. (2014). MODELIZACIÓN DE LA VOLATILIDAD CONDICIONAL EN ÍNDICES BURSÁTILES : COMPARATIVA MODELO EGARCH VERSUS RED NEURONAL BACKPROPAGATION [Tesis doctoral]. Editorial Universitat Politècnica de València. doi:10.4995/Thesis/10251/35803., Alfresco

The volatility of financial markets has been a relevant topic for transition economies, as the countries of Central and Eastern Europe and the former Soviet Union have seemingly endured high levels of volatility in their financial sectors during the transition process. But what have been the determinants of this financial volatility? This paper posits that institutional changes, and in particular the volatility of various crucial institutions, have been the major causes of financial volatility in transition. Examining 20 transition economies over various time-frames within the period 1993-2012, this paper applies the GARCH family of models to examine financial volatility as a function of institutional volatility. The results from the EGARCH and TGARCH modelling supports the thesis that more advanced and more stable institutions help to dampen financial sector volatility at their levels, while institutional volatility feeds through directly to financial sector volatility in transition.

Since the onset of the global financial crisis, the sovereign risk premium differential and associated government bond yields have been widening so much as to cause the Eurozone crisis. The stylized facts of the 10-year Greek government bond yield attract much interest since there are deepened fears of this spreading to the government bonds of other European countries. Moreover, the impact of the Greek bond market on other European countries during the crisis period has not been examined adequately in the international literature. By employing a set of wellestablished econometric methods, in which we take into account the presence of heteroskedasticity, we do not find any evidence for the existence of contagious effects stemming from the Greek 10-year government bonds to the government bond markets of other European countries.

We analyse the performance characteristics of sustainable investments over the period 2004 to 2013. Our unconditional analysis shows that the sustainable portfolios, represented by the Dow Jones Sustainability Indices for the global and three regional markets, experience lower Sharpe ratios than their corresponding conventional portfolios. The conditional analysis indicates some evidence of significant effects of the recent crisis on sustainable investment return and volatility, while the US policy uncertainty only affects returns in two regions (Asia Pacific and North America) during the crisis period. We finally find a relative decoupling of sustainable investing from the overall market system during crisis times.

This paper examines empirically whether oil price shocks impact stock market returns. Using monthly data for eight developed countries from January 1991 to September 2013, strong negative connections between oil price and stock market returns are found in seven of the selected countries. Oil price changes are without significant effect on the stock market of Singapore. On the volatility of returns, the changes in oil prices are significant for six markets and they have not much effect on the others.

The volatility of financial markets has been a relevant topic for transition economies, as the countries of Central and Eastern Europe and the former Soviet Union have seemingly en-dured high levels of volatility in their financial sectors during the transition process. But what have been the determinants of this financial volatility? This paper posits that institutional changes, and in particular the volatility of various crucial institutions, have been the major causes of financial volatility in transition. Examining 20 transition economies over various time-frames within the period 1993-2012, this paper applies the GARCH family of models to examine financial volatility as a function of institutional volatility. The results from the EGARCH and TGARCH modelling supports the thesis that more advanced and more stable institutions help to dampen financial sector volatility at their levels, while institutional volatility feeds through directly to financial sector volatility in transition.

This thesis examines the volatility forecasting performance of six commonly used forecasting models; the simple moving average, the exponentially weighted moving average, the ARCH model, the GARCH model, the EGARCH model and the GJR-GARCH model. The dataset used in this report are three different Nordic equity indices, OMXS30, OMXC20 and OMXH25. The objective of this paper is to compare the volatility models in terms of the in-sample and out-of-sample fit. The results were very mixed. In terms of the in-sample fit, the result was clear and unequivocally implied that assuming a heavier tailed error distribution than the normal distribution and modeling the conditional mean significantly improves the fit. Moreover a main conclusion is that yes, the more complex models do provide a better in-sample fit than the more parsimonious models. However in terms of the out-of-sample forecasting performance the result was inconclusive. There is not a single volatility model that is preferred based on all the loss functions. An important finding is however not only that the ranking differs when using different loss functions but how dramatically it can differ. This illuminates the importance of choosing an adequate loss function for the intended purpose of the forecast. Moreover it is not necessarily the model with the best in-sample fit that produces the best out-of-sample forecast. Since the out-of-sample forecast performance is so vital to the objective of the analysis one can question whether the in-sample fit should even be used at all to support the choice of a specific volatility model.

The aim of this study is to analyze the volatility of exchange rates of the currencies of the five East African Community (EAC) countries. Time series modeling is applied to the data of these countries. Various models were fitted and compared using Maximum Likelihood approach in order to select the best fitting model for each of these countries. The paper also aims at establishing whether NEWS affects the smooth movements of the exchange rates. Static and dynamic forecasts were obtained for periods of unrests to ascertain the contribution of the NEWS to abrupt shifts in the exchange rates movements. The results show that all the economies yield significant volatility models implying that the exchange rate volatility does exist in these countries. Furthermore, forecasts show that the exchange rate volatility in these countries reduce after the date of each one’s joining the EAC. This implies that openness of these economies should be encouraged to reduce the exchange rate volatilities of their currencies. The existence of high rates of exchange volatility could be explained by the fact that these currencies are not pegged to any major international currency. The countries are thus advised to peg their currency to avoid future fluctuations.

Journal article This study examines the effects that Contracts for Difference (CFDs) have had on theAustralian equity market, either as an accelerant for mispricing, or as a source of increased marketfunctionality through the addition of a new tradable product and increased liquidity. The AustralianSecurities Exchange (ASX) made the decision to segregate CFDs to a separate ring-fenced exchangein November 2007. This study uses EGARCH techniques to test for the effects of CFDs on returnvolatility at the time of CFD inclusion and segregation in Australian equity markets at the index andequity-specific level. A fully worked explanation and example of a CFD-influenced overhang is alsoprovided. The results provide evidence that cannot reject the presence of overhangs in Australianequity markets. Not

Treball Final del Màster Universitari en Gestió Financera i Comptabilitat Avançada. Codi: SRG031. Curs acadèmic 2013-2014 En este trabajo se intentará establecer una relación entre la volatilidad diaria de un índice, el IBEX 35 español, y posibles anuncios macroeconómicos. Para ello de desarrollaran tres métodos, dos de ellos derivados del primero, el método ARCH creado por Robert Engle en 1982, los otros dos métodos aplicados son el modelo GARCH Bollerslev (1986) y el modelo EGARCH Nelson (1991). Con el uso del programa Eviews y por el método de mínimo AIC y SIC se elige el modelo EGARCH como más óptimo para nuestra estimación. Con la estimación hecha se realiza una búsqueda por varias hemerotecas para definir si los picos de volatilidad son consecuencia de hechos macroeconómicos concretos o no. Con el estudio se ve reflejado otro concepto, la aversión al riesgo de los inversores para explicar periodos volátiles largos.

The reaction of EU bond and equity market volatilities to sovereign rating announcements (Standard & Poor’s, Moody’s, and Fitch) is investigated using a panel of daily stock market and sovereign bond returns. The parametric volatilities are filtered using EGARCH specifications. The estimation results show that upgrades do not have significant effects on volatility, but downgrades increase stock and bond market volatility. Contagion is present, with sovereign rating announcements creating interdependence among European financial markets with upgrades (downgrades) in one country leading to a decrease (increase) in volatility in other countries. The empirical results show also a financial gain and risk (value-at-risk) reduction for portfolio returns when taking into account sovereign credit ratings’ information for volatility modelling, with financial gains decreasing with higher risk aversion.

A time series model in which the signal is buried in noise that is non-Gaussian may throw up observations that, when judged by the Gaussian yardstick, are outliers. We describe an observation driven model, based on an exponential generalized beta distribution of the second kind (EGB2), in which the signal is a linear function of past values of the score of the conditional distribution. This specification produces a model that is not only easy to implement, but which also facilitates the development of a comprehensive and relatively straight forward theory for the asymptotic distribution of the maximum likelihood estimator. Score driven models of this kind can also be based on conditional t-distributions, but whereas these models carry out what, in the robustness literature, is called a soft form of trimming, the EGB2 distribution leads to a soft form of Winsorizing. An EGARCH model based on the EGB2 distribution is also developed. This model complements the score driven EGARCH model with a conditional t-distribution. Finally dynamic location and scale models are combined and applied to data on the UK rate of inflation.

In dieser Arbeit werden Auswirkungen von Agar-Optionen auf die Volatilität des den Optionen zugrundeliegenden Futuresmarktes analysiert. Bisherige Analysen bezogen sich nahezu ausschließlich auf den Finanzmarkt. Für den Agrarmarkt scheinen noch keine empirischen Erkenntnisse zu existieren. Es besteht die Sichtweise, dass Optionen exzessive Volatilität im zugrundeliegenden Basismarkt hervorrufen könnten. Die vorliegende Arbeit soll einen Teil zur Diskussion um die Agrarpreisspekulation und den damit verbundenen Auswirkungen auf die Preisentwicklung beitragen. Gegenstand ist der Mais-Derivatemarkt der französischen Terminbörse MATIF. Zur Analyse wird auf ein EGARCH-Modell zurückgegriffen. Die auf zwei Untersuchungszeiträume von Dezember 2000 bis Dezember 2007 und Dezember 2007 bis Dezember 2013 geschätzten Ergebnisse lassen keine signifikanten Zusammenhänge der Volatilität des Futuresmarktes und dem Optionshandel erkennen.

The contributions of error distributions have been ignored while modeling stock market volatility in Nigeria and studies have shown that the application of appropriate error distribution in volatility model enhances efficiency of the model. Using Nigeria All Share Index from January 2, 2008 to February 11, 2013, this study estimates first order symmetric and asymmetric volatility models each in Normal, Student's-t and generalized error distributions with the view to selecting the best forecasting volatility model with the most appropriate error distribution. The results suggest the presence of leverage effect meaning that volatility responds more to bad news than it does to equal magnitude of good news. The news impact curves validate this result. The last twenty eight days out-of-sample forecast adjudged Power-GARCH (1, 1, 1) in student's t error distribution as the best predictive model based on Root Mean Square Error and Theil Inequality Coefficient. The study therefore recommends that empirical works should consider alternative error distributions with a view to achieving a robust volatility forecasting model that could guarantee a sound policy decisions.

Este documento presenta un cálculo del Costo de uso del capital para Colombia en el periodo 1990-2007. Seguidamente, contrasta este cálculo con la dinámica de la inversión en el mismo periodo. Se encuentra que la relación entre inversión y costo de uso es muy estrecha, y se comprueba que el enorme crecimiento de la inversión en los últimos periodos está asociado a niveles bajos y estables del costo de uso del capital., This paper presents the construction of the use cost of capital for the Colombian economy in 1990-2007. Then, this calculation is contrasted with the dynamic of investment in the same period. It is found that the relation between investment and use cost of capital is very narrow, and it is proved that the large growth of investment in the last periods is associated with low and stable levels of the use cost of capital.

This paper proposes a new stochastic volatility model to represent the dynamic evolution of conditionally heteroscedastic time series with leverage effect. Although there are already several models proposed in the literature with the same purpose, our main justification for a further new model is that it nests some of the most popular stochastic volatility specifications usually implemented to real time series of financial returns. We derive closed-form expressions of its statistical properties and, consequently, of those of the nested specifications. Some of these properties were previously unknown in the literature although the restricted models are often fitted by empirical researchers. By comparing the properties of the restricted models, we are able to establish the advantages and limitations of each of them. Finally, we analyze the performance of a MCMC estimator of the parameters and volatilities of the new proposed model and show that, if the error distribution is known, it has appropriate finite sample properties. Furthermore, estimating the new model using the MCMC estimator, one can correctly identify the restricted true specifications. All the results are illustrated by estimating the parameters and volatilities of simulated time series and of a series of daily S&P500 returns

In this paper the value at risk (VaR) forecasts are compared using three different GARCH models; ARCH(1), GARCH(1,1) and EGARCH(1,1). The implemented method is a one-day ahead out of sample forecast of the VaR. The forecasts are evaluated using the Kupiec test with a five percent significance level. The focus is on three different markets; commodities, equities and exchange rates. The goal of this thesis is to answer which of the models; ARCH(1), GARCH(1,1) and EGARCH(1,1) is best at forecasting the VaR for commodities, equities and exchange rates.Which assumed distribution for the conditional variance performs the best? Is the normal distribution or the Student-t a better option when forecasting VaR? The results shows that the ARCH(1) and EGARCH(1,1) model specifications are good options for forecasting the VaR for the chosen securities. These models give rise to a statistical significant forecast for the VaR with only one exception, the exchange rate between the SEK and USD. The worst performing model is the GARCH(1,1), which showed no significant results for any security. The normal distribution is the preferred conditional distribution assumption. In some securities the Student-t distribution shows a marginally better result, but the normal distribution is also a valid option in those cases.

Mestrado em Economia Monetária e Financeira O objetivo do trabalho proposto é analisar o impacto das alterações de notação soberana atribuídas pelas agências de rating Moody's, Standard and Poors e Fitch na volatilidade do retorno das taxas de câmbio Euro-Dólar. A volatilidade foi definida através de especificações EGARCH e, com o intuito de adicionar uma ponderação a determinadas alterações de notação, foi construída uma variável específica - variável ponderada. Este estudo analisa o período que decorreu entre 1999:1 e 2013:5 e concluiu-se que os choques negativos têm um impacto superior face aos choques positivos, que o outlook tem um impacto superior em relação ao upgrade ou downgrade e a Standard and Poors é a agência que apresenta maior impacto na volatilidade do retorno da taxa de câmbio. The main purpose of this study is to measure the impact of sovereign credit rating announcements from Moody's, Standard and Poors and Fitch on Euro-Dollar exchange rate return. The volatility was defined with EGARCH specifications and in order to add more weight to certainty sovereign rating changes, a specific variable was constructed. This study covers the period from 1999:1 until 2013:5 and we find that negative announcements have a bigger impact than the positive, outlook have bigger impact than upgrade or downgrade and, Standard and Poors is the agency with the highest impact on the exchange rate return.

The temporary convergence of beliefs and actions is a possibility. Positive feedback trading as a stock exchange trading strategy is commonly used as one of the oldest theories about fi nancial markets. Sentana-Wadhwani model was used to test Positive feedback trading. Even though the model supposes that low volatility is associated with positive autocorrelation and high volatility is associated with negative autocorrelation, empirical research for small and young emerging stock exchange shows that high volatility is followed by positive autocorrelation and positive feedback strategy. Accordingly this is evidence in favour of behavioral over traditional fi nance. Investors prefer to follow positive feedback strategy, ignoring fundamental values.

In this paper we consider a heavy-tailed stochastic volatility model, $X_t=\sigma_tZ_t$, $t\in\mathbb{Z}$, where the volatility sequence $(\sigma_t)$ and the i.i.d. noise sequence $(Z_t)$ are assumed independent, $(\sigma_t)$ is regularly varying with index $\alpha>0$, and the $Z_t$'s have moments of order larger than $\alpha$. In the literature (see Ann. Appl. Probab. 8 (1998) 664-675, J. Appl. Probab. 38A (2001) 93-104, In Handbook of Financial Time Series (2009) 355-364 Springer), it is typically assumed that $(\log\sigma_t)$ is a Gaussian stationary sequence and the $Z_t$'s are regularly varying with some index $\alpha$ (i.e., $(\sigma_t)$ has lighter tails than the $Z_t$'s), or that $(Z_t)$ is i.i.d. centered Gaussian. In these cases, we see that the sequence $(X_t)$ does not exhibit extremal clustering. In contrast to this situation, under the conditions of this paper, both situations are possible; $(X_t)$ may or may not have extremal clustering, depending on the clustering behavior of the $\sigma$-sequence., Comment: Published in at http://dx.doi.org/10.3150/12-BEJ426 the Bernoulli (http://isi.cbs.nl/bernoulli/) by the International Statistical Institute/Bernoulli Society (http://isi.cbs.nl/BS/bshome.htm)

Studien syftar till att undersöka huruvida det finns ett signifikant samband mellan den svenska reporäntan och prisbildningen av aktier inkluderade i indexet OMXS30. Datamaterialet täcker perioden 2004 till 2012 och hämtas direkt från NASDAQ OMX Nordic. Genom en eventstudie och med hjälp av Marknadsmodellen estimeras en abnormal avkastning för händelseperioderna. För att ta hänsyn till de estimeringsproblem som finns associerade med finansiell tidsseriedata och dess varians används en EGARCH-modell. Resultatet tyder på en signifikant negativ korrelation mellan reporäntan och marknadspriserna på Stockholmsbörsen. Det finns även indikationer på att en asymmetri existerar vad gäller negativa och positiva nyheters inverkan på variansen.

Working paper Contracts for Difference (CFDs) have existed for less than twenty years and the market has grown significantly up to the period before the recent international crises. This paper presents an analysis of how CFDs have affected equity market volatility in Ireland. EGARCH models are used to uncover volatility changes in the periods before and after the introduction of the new trading product in Ireland. We find that CFDs appear to have lowered asset-specific volatility across the majority of equities traded on the Irish Stock Exchange. These findings do not correspond to the expected volatility increase associated with leveraged products that are closely associated with high frequency trading. Our empirical analysis suggests that CFDs are having an alternative volatility reducing effect through the presence of bid and ask price overhangs that are generated through the hedging practices of CFD brokers. A fully worked example of the development of an overhang is provided. non-peer-reviewed

Working paper This study examines the effects that Contracts for Difference (CFDs) have had on theAustralian equity market, either as an accelerant for mispricing, or as a source of increased marketfunctionality through the addition of a new tradable product and increased liquidity. The AustralianSecurities Exchange (ASX) made the decision to segregate CFDs to a separate ring-fenced exchangein November 2007. This study uses EGARCH techniques to test for the effects of CFDs on returnvolatility at the time of CFD inclusion and segregation in Australian equity markets at the index andequity-specific level. A fully worked explanation and example of a CFD-influenced overhang is alsoprovided. The results provide evidence that cannot reject the presence of overhangs in Australianequity markets. non-peer-reviewed

The thesis compares GARCH volatility models and Stochastic Volatility (SV) models with Student's t distributed errors and its empirical forecasting per- formance of Value at Risk on five stock price indices: S&P, NASDAQ Com- posite, CAC, DAX and FTSE. It introduces in details the problem of SV models Maximum Likelihood examinations and suggests the newly devel- oped approach of Efficient Importance Sampling (EIS). EIS is a procedure that provides an accurate Monte Carlo evaluation of likelihood function which depends upon high-dimensional numerical integrals. Comparison analysis is divided into in-sample and out-of-sample forecast- ing performance and evaluated using standard statistical probability back- testig methods as conditional and unconditional coverage. Based on empirical analysis thesis shows that SV models can perform at least as good as GARCH models if not superior in forecasting volatility and parametric VaR. 1

The relationships among the macroeconomic variables and stock returns analyzed in both the developed and developing countries, but are not well estimated in Pakistan. The current study explores the time series as analysis of economic variables and stock market by applying the Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH). The macroeconomic variables include interest rate, inflation, and gross domestic product. For representation of stock market, Karachi Stock Exchange (KSE-100 Index) is taken as test market. The monthly data of the variables for the time period from December 1991 to August 2012 is used for the current study analysis. The ADF and ARCH tests are used to check the stationarity and homoskedasticity in the data respectively. The results show that macroeconomic variables have substantial influence on the stock prices. The stock prices have much impact on the economy of the country, and are consider as the best indicators for future prediction of the market and economy as well. Furthermore, the stock market in Pakistan is highly volatile the regulatory bodies must pay attention to make it less volatile.

En este artículo se analiza el efecto apalancamiento en el mercado bursátil colombiano, para dicho fin se usan modelos de la familia ARCH que permitan evaluar si tal efecto está presente en el mercado de acciones, específicamente se usan los modelos no lineales EGARCH y TGARCH. Las series elegidas para realizar dicho análisis son el Índice General de la Bolsa de Valores que es el índice más representativo del mercado de acciones del país junto con el índice COLPAC, adicionalmente se tendrán en cuenta seis de las acciones colombianas que son más transadas en la actualidad. Finalmente se encuentra que el mercado accionario de Colombia sí cuenta con efecto apalancamiento, es decir las malas noticias tienen un impacto mayor en la volatilidad de los rendimientos financieros.

Los modelos de volatilidad estocástica tratan de explicar las características de las series de retornos de acciones y otros activos financieros. En estos modelos, la volatilidad se considera un proceso aleatorio latente, el cual determina, en parte, las propiedades de la distribución de los retornos. Pese a que en teoría reproducen bien las principales características de los datos, los modelos de volatilidad estocástica tienen la dificultad que no permiten deducir una expresión analítica para la función de verosimilitud, por lo que su estimación se debe abordar desde otros enfoques. Uno de los métodos que ha sido propuesto es el Método de Momentos Eficiente (EMM), cuya idea fundamental es utilizar los valores esperados de los scores de una densidad auxiliar bajo el modelo de volatilidad estocástica como condiciones de momentos en un criterio GMM. En la medida que la densidad auxiliar se ajusta mejor a los datos, el estimador EMM es más eficiente. El objetivo de esta tesis es llevar a cabo un estudio Monte Carlo de la capacidad del EMM para estimar modelos de volatilidad estocástica con respuesta asimétrica de la volatilidad a cambios en los precios (efecto leverage). Entre los modelos auxiliares empleados en la estimación, se propone la utilización del modelo ARCH asimétrico (APARCH), debido a que éste puede reproducir el efecto de asimetría, entre otras características observadas en los datos. / Abstract: Stochastic volatility models try to explain observed features of stock returns and other financial assets. These models treat volatility as a latent stochastic process that partly determines the properties of the distribution of returns. Due to the absence of a likelihood function, estimation of stochastic volatility models must be tackled from alternative approaches. One of the methods that has been proposed is the Efficient Method of Moments (EMM), whose basic idea is to use the expectation of the scores of an auxiliary density under the stochastic volatility model as moment conditions in a GMM criterion. As the auxiliary density better fits the data, the EMM estimator becomes more efficient. The objective of this thesis is to carry out a Monte Carlo study of the capability of EMM to estimate stochastic volatility models with leverage effect. Among the auxiliary models considered, we propose the use of the APARCH model, since it can reproduce the asymmetric effect, among other observed features of the data. Maestría

This paper investigates how banks, as a group, react to macroeconomic risk and uncertainty, and more specifically the way banks systemic risk evolves over the business cycle. Adopting the methodology of Beaudry et al. (2001), our results clearly suggest that the dispersion across banks traditional portfolios has increased through time. We introduce an estimation procedure based on EGARCH and refine Baum et al. (2002, 2004, 2009) and Quagliariello (2007, 2009) framework to analyze the question in the new industry context, i.e. shadow banking. Consistent with finance theory, we first confirm that banks tend to behave homogeneously vis-à-vis macroeconomic uncertainty. In particular, we find that the cross-sectional dispersions of loans to assets and non-traditional activities shrink essentially during downturns, when the resilience of the banking system is at its lowest. More importantly, our results also suggest that the cross-sectional dispersion of market-oriented activities is both more volatile and sensitive to the business cycle than the dispersion of the traditional activities.

The purpose of this thesis is to examine whether Swedish Equity L/S hedge funds present a lower market risk than the index S&P Europe 350 over our holding period using a GARCH/EGARCH Value-at-Risk model. The sample consists of 96 monthly observa- tions between March 2004 and February 2012. The examination shows that the hedge funds in general hold a lower market risk than the index for the next holding period and al- so present a lower estimated loss if our VaR loss is exceeded. This implies that hedge funds would be a good choice for investors to have in a portfolio to reduce the risk.

This paper seeks to assess the reactions of Nigeria's stock market to monetary policy innovations during the period of global financial crisis on the basis of monthly data over the period January, 2007 to August, 2011. In particular, stock market return was regressed against major monetary policy instruments; money stock (M1, and M2) and monetary policy rate (MPR). The theoretical basis for the paper stems from the works of new classical macroeconomics and rational expectation hypothesis (REH). Lucas (1972) postulated that only the unanticipated monetary shock influences real economic activity. Using the GARCH by developed Engle and Bollerslev (1986) and EGARCH by Nelson (1991) methodologies, the paper empirically assessed the impact monetary policy innovations exerts on stock returns in the Nigeria's Stock Exchange (NSE) market during the period of the crisis. Results from the empirical analysis revealed that the unaticipated component of policy innovations on M2 and MPR exerts distabilizing effect on NSE's returns, whereas the anticipated component does not. This lends support to the REH argument for the Nigerian stock market. The pqper strongly recommends realistic and timely policy pronouncements by the MPC to achieve stability in the market.