News Impact Curve and Test for Asymmetric Volatility

Abstract

It is common in financial time series that volatility(conditional variance) as a measure of risk exhibits asymmetry in such a manner that positive and negative values of return rates of the series tend to provide different contributions to the volatility. We are concerned with asymmetric conditional variances for Korean financial time series especially during the time span of 2000-2001. Notice that these periods suffer from 9-11 disaster in US and collapses of stock prices of dot-companies in Korea. Threshold-ARCH models are considered and a Wald test of asymmetry is suggested. News impact curves are illustrated for graphical representations of leverage effects inherent in various Korean financial time series.