Author: Missaka WarusawitharanaPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Time-varying Volatility and the Power Law Distribution of Stock Returns
Author: Missaka WarusawitharanaTime-varying Volatility and Returns on Ordinary Shares
Author: Impacts of Macroeconomic Factors on Stock Returns and Volatility
Author: Chibuzo AmaefulaPublisher: LAP Lambert Academic Publishing
ISBN: 9783659557446
Category :
Languages : en
Pages : 256
Book Description
The robustness of this research book is evident in its contribution to knowledge. It has shown that the variance equation can contain more than two exogenous variables without violating the non-negativity condition of the conditional variance under univariate GARCH specification and the use of univariate GARCH (p, q) model in examining volatility spillover effect. It has also studied time varying correlation using the diagonal BEKK model with OLS method to test the effect of the time trend on the correlation and the CCC-Model as a 'check model'. The research has empirically shown that the structure of correlation between stock returns and interest rate is time variant while relative to exchange rate and inflation is time invariant. The research empirical results have also shown that the correlation of stock returns volatility relative to the volatility of exchange rate and inflation rate vary over time and relative to interest rate volatility is time invariant. The dimensions of this book has made it be a reference book to many researchers and has also breached the gap between past research and future research.
Why Does Stock Market Volatility Change Over Time? A Time-Varying Variance Decomposition for Stock Returns
Author: John T. ScruggsPublisher:
ISBN:
Category :
Languages : en
Pages : 56
Book Description
We extend the variance decomposition model of Campbell (1991) to allow for time-varying stock market volatility. Specifically, we introduce a model in which the covariance matrix of the vector autoregression (VAR) follows a multivariate stochastic volatility (MSV) process. This VAR-MSV model permits the decomposition of unexpected real stock return variance into three time-varying components: variance of news about future dividends, variance of news about future returns, and a covariance term. We develop Bayesian Markov chain Monte Carlo (MCMC) econometric techniques for estimating the VAR-MSV model. These methods are well-suited for estimating models with latent stochastic volatilities, and are not subject to the small-sample biases and unit root problems that plague frequentist estimation of predictive regressions. We report strong evidence that real stock returns are predictable when the dividend-price ratio and a stochastically detrended short-term interest rate are employed as forecasting variables. The time-varying variance of news about future returns is the primary determinant of stock market volatility (both levels and changes). The variance of news about future dividends increased dramatically during the 1973-1974 recession and peaked during the 1980 recession before descending in the 1980s. However, its contribution to stock market volatility was offset by positive correlation between news about future dividends and news about future returns from 1974-1984.
Scale Invariance and Beyond
Author: B. DubrullePublisher: Springer Science & Business Media
ISBN: 3662097990
Category : Science
Languages : en
Pages : 291
Book Description
This book is an excellent introduction to the concept of scale invariance, which is a growing field of research with wide applications. It describes where and how symmetry under scale transformation (and its various forms of partial breakdown) can be used to analyze solutions of a problem without the need to explicitly solve it. The first part gives descriptions of tools and concepts; the second is devoted to recent attempts to go beyond the invariance or symmetry breaking, to discuss causes and consequences, and to extract useful information about the system. Examples are carefully worked out in fields as diverse as condensed matter physics, population dynamics, earthquake physics, turbulence, cosmology and finance.
Equity Return Predictability, Time Varying Volatility and Learning about the Permanence of Shocks
Author: Daniel TortoriceDiscrete Time Series, Processes, and Applications in Finance
Author: Gilles ZumbachPublisher: Springer Science & Business Media
ISBN: 3642317413
Category : Business & Economics
Languages : en
Pages : 326
Book Description
This book surveys empirical properties of financial time series, discusses their mathematical basis, and describes uses in risk evaluation, option pricing or portfolio construction. The author introduces and assesses a range of processes against the benchmark.
Complex Systems in Finance and Econometrics
Author: Robert A. MeyersPublisher: Springer Science & Business Media
ISBN: 1441977007
Category : Business & Economics
Languages : en
Pages : 919
Book Description
Finance, Econometrics and System Dynamics presents an overview of the concepts and tools for analyzing complex systems in a wide range of fields. The text integrates complexity with deterministic equations and concepts from real world examples, and appeals to a broad audience.
The Dynamic Power Law Model
Author: Bryan T. KellyPublisher:
ISBN:
Category :
Languages : en
Pages : 31
Book Description
I propose a new measure of common, time-varying tail risk for large cross sections of stock returns. Stock return tails are described by a power law in which the power law exponent is allowed to transition smoothly through time as a function of recent data. It is motivated by asset pricing theory and is estimable via quasi-maximum likelihood. Estimates indicate substantial time variation in stock return tails, and that the risk of extreme returns rises in weak economic conditions.
Volatility and Correlation
Author: Riccardo RebonatoPublisher: John Wiley & Sons
ISBN: 0470091401
Category : Business & Economics
Languages : en
Pages : 864
Book Description
In Volatility and Correlation 2nd edition: The Perfect Hedger and the Fox, Rebonato looks at derivatives pricing from the angle of volatility and correlation. With both practical and theoretical applications, this is a thorough update of the highly successful Volatility & Correlation – with over 80% new or fully reworked material and is a must have both for practitioners and for students. The new and updated material includes a critical examination of the ‘perfect-replication’ approach to derivatives pricing, with special attention given to exotic options; a thorough analysis of the role of quadratic variation in derivatives pricing and hedging; a discussion of the informational efficiency of markets in commonly-used calibration and hedging practices. Treatment of new models including Variance Gamma, displaced diffusion, stochastic volatility for interest-rate smiles and equity/FX options. The book is split into four parts. Part I deals with a Black world without smiles, sets out the author’s ‘philosophical’ approach and covers deterministic volatility. Part II looks at smiles in equity and FX worlds. It begins with a review of relevant empirical information about smiles, and provides coverage of local-stochastic-volatility, general-stochastic-volatility, jump-diffusion and Variance-Gamma processes. Part II concludes with an important chapter that discusses if and to what extent one can dispense with an explicit specification of a model, and can directly prescribe the dynamics of the smile surface. Part III focusses on interest rates when the volatility is deterministic. Part IV extends this setting in order to account for smiles in a financially motivated and computationally tractable manner. In this final part the author deals with CEV processes, with diffusive stochastic volatility and with Markov-chain processes. Praise for the First Edition: “In this book, Dr Rebonato brings his penetrating eye to bear on option pricing and hedging.... The book is a must-read for those who already know the basics of options and are looking for an edge in applying the more sophisticated approaches that have recently been developed.” —Professor Ian Cooper, London Business School “Volatility and correlation are at the very core of all option pricing and hedging. In this book, Riccardo Rebonato presents the subject in his characteristically elegant and simple fashion...A rare combination of intellectual insight and practical common sense.” —Anthony Neuberger, London Business School