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- Title
Forecasting the conditional heteroscedasticity of stock returns using asymmetric models based on empirical evidence from Eastern European countries: Will there be an impact on other industries?
- Authors
COKER-FARRELL, ELIZABETH; IMRAN, ZULFIQAR ALI; SPULBAR, CRISTI; EJAZ, ABDULLAH; BIRAU, RAMONA; CRIVEANU, RADU CĂTĂLIN
- Abstract
This empirical study investigates the leverage effect in six Eastern European countries under normal and non-normal distribution densities for the sample period from January 2020 to August 2020. We find three countries, Bulgaria, Czech Republic and Russia which are subject to ARCH effect whereas Poland, Romania and Hungary do not exhibit ARCH effect in daily stock returns. Further, our study finds leverage effect, where past bad news affects is asymmetrical, past negative returns cause more volatility in current stock returns as compared to past positive returns, in three Eastern European countries. Based on the AIC and BIC model selection criteria we find that the non-normal student t-distribution and GED produce reliable estimates for Bulgaria, Czech Republic and Poland, respectively. The autocorrelation function Q1 statistic confirms the insignificance of autocorrelation in residuals of TGARCH model. The impact of stock market dynamics on other industries, such as pharmaceutical industry, textile and clothing industry, automotive industry is significant, especially in the conditions of COVID-19 pandemic.
- Subjects
BULGARIA; POLAND; CZECH Republic; COVID-19 pandemic; HETEROSCEDASTICITY; CLOTHING industry; STOCK exchanges; GAUSSIAN distribution; EARNINGS forecasting; FORECASTING
- Publication
Industria Textila, 2021, Vol 72, Issue 3, p324
- ISSN
1222-5347
- Publication type
Article
- DOI
10.35530/IT.072.03.202042