Asymmetric Volatility in Asian Stock Market: Impact of Global Financial Crisis

Analysis of stock returns and its volatility is one of key aspects of stock markets that have attracted much attention in financial literature. It has been empirically observed that positive return shocks have smaller impact on future volatility than do negative innovations of the same size. Therefore, this paper deals with asymmetric response of equity volatility to return shocks. Empirical effects of positive and negative news on volatility are examined using daily data from leading Asian stock markets that includes time period of 2004-2012 years. For the purpose of this paper it will be utilized selected nonlinear conditional heteroskedasticity models assuming generalized error distribution. In addition, it will be also investigated whether expected returns on an asset are related to the expected asset risk.