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Hi everyone,
I have studied modelling and forecasting the volatility. The EGARCH and TARCH are used to capture changes in variance of the FTSE 100 stock returns from 1999 to 2010. However, I found a conflicting result between two models concerning leverage effect. The EGARCH model shows that there is an existence of leverage effect meanwhile the TARCH model rejects the presence of leverage effect for the case of FTSE 100 returns during this period.
I am trying to figure out the reasons for this case. One of papers I have read and from my point of view, the highly volatile period of stock market return series may cause the mixed result. And I found that it may be true for the case of FTSE 100 stock market this period which is very volatile for some extent. However, I am not very persuaded with this way to explain. I still keep thinking about it.
Could you please give me some ideas about the reason for this conflict and what inference can be drawn about leverage effect.
Many thanks for your consideration.
I have studied modelling and forecasting the volatility. The EGARCH and TARCH are used to capture changes in variance of the FTSE 100 stock returns from 1999 to 2010. However, I found a conflicting result between two models concerning leverage effect. The EGARCH model shows that there is an existence of leverage effect meanwhile the TARCH model rejects the presence of leverage effect for the case of FTSE 100 returns during this period.
I am trying to figure out the reasons for this case. One of papers I have read and from my point of view, the highly volatile period of stock market return series may cause the mixed result. And I found that it may be true for the case of FTSE 100 stock market this period which is very volatile for some extent. However, I am not very persuaded with this way to explain. I still keep thinking about it.
Could you please give me some ideas about the reason for this conflict and what inference can be drawn about leverage effect.
Many thanks for your consideration.