Asymmetric Effects in Emerging Stock Markets - The Case of Iran Stock Market

Seyyed Ali Paytakhti Oskooe, Ali Shamsavari

Abstract


In view of the mixed empirical results in the literature, this paper assesses the extent of asymmetric volatility effects in the Iranian stock market as an emerging stock market, using a variety of nonlinear autoregressive conditional heteroskedasticity specifications. Tests based on standardized residuals from a fitted GARCH model suggest a lack of asymmetric effects in the dynamic volatility of the Iranian stock market. Empirical analyses with asymmetric GARCH models also reject the hypothesis of asymmetric volatility, in contrast to most developed and emerging markets. Hence, good and bad news of the same magnitude have similar impacts on the volatility level in the Iranian stock market. The leverage effect modified by inflation advantage and price limit may be the main reasons for lack of asymmetric effect in emerging stock markets.


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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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