No News is Good News: An Asymmetric Model of Changing Volatility in Stock Returns

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No News is Good News: An Asymmetric Model of Changing Volatility in Stock Returns

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Title: No News is Good News: An Asymmetric Model of Changing Volatility in Stock Returns
Author: Hentschel, Ludger; Campbell, John

Note: Order does not necessarily reflect citation order of authors.

Citation: Campbell, John Y., and Ludger Hentschel. 1992. No news is good news: An asymmetric model of changing volatility in stock returns. Journal of Financial Economics 31, no. 3: 281-318.
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Abstract: It seems plausible that an increase in stock market volatility raises required stock returns, and thus lowers stock prices. We develop a formal model of this volatility feedback effect using a simple model of changing variance (a quadratic generalized autoregressive conditionally heteroskedastic, or QGARCH, model). Our model is asymmetric and helps to explain the negative skewness and excess kurtosis of U.S. monthly and daily stock returns over the period 1926–1988. We find that volatility feedback normally has little effect on returns, but it can be important during periods of high volatility.
Published Version: http://dx.doi.org/10.1016/0304-405X(92)90037-X
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:3220232

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  • FAS Scholarly Articles [7594]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

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