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Empirical Analyses of Asymmetric Conditional Heteroscedasticities for the KOSPI and Korean Won-US Dollar Exchange Rate

KOSPI지수와 원-달러 환율의 변동성의 비대칭성에 대한 실증연구

Maeng, Hye-Young;Shin, Dong-Wan
맹혜영;신동완

  • Received : 20110900
  • Accepted : 20111000
  • Published : 2011.12.31

Abstract

In this paper, we use a nested family of models of Generalized Autoregressive Conditional Heteroscedasticity(GARCH) to verify asymmetric conditional heteroscedasticity in the KOSPI and Won-Dollar exchange rate. This study starts from an investigation of whether time series data have asymmetric features not explained by standard GARCH models. First, we use kernel density plot to show the non-normality and asymmetry in data as well as to capture asymmetric conditional heteroscedasticity. Later, we use three representative asymmetric heteroscedastic models, EGARCH(Exponential Garch), GJR-GARCH(Glosten, Jagannathan and Runkle), APARCH(Asymmetric Power Arch) that are improved from standard GARCH models to give a better explanation of asymmetry. Thereby we highlight the fact that volatility tends to respond asymmetrically according to positive and/or negative values of past changes referred to as the leverage effect. Furthermore, it is verified that how the direction of asymmetry is different depending on characteristics of time series data. For the KOSPI and Korean won-US dollar exchange rate, asymmetric heteroscedastic model analysis successfully reveal the leverage effect. We obtained predictive values of conditional volatility and its prediction standard errors by using moving block bootstrap.

Keywords

Asymmetric Volatility;Garch Models;Kernel density plot;Bootstrap

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Acknowledgement

Supported by : 연구재단