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Multiple asymmetries in index stock returns from boom/bust and stable/volatile markets states- an empirical study of US and UK stock markets

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  • Ming-Yuan Leon Li

Abstract

This article tries to answer the question: is the response of current returns to past returns asymmetric when the returns follow an autoregressive, spillover GARCH model? Our empirical findings are consistent with the following notions. First, both US and UK markets appear to overreact to the drastic events in the 1990s. Second, the impacts of the 1-week-ahead foreign market returns were marked during the 1980s, especially when the home market returns were both volatile and negative. In contrast, the impacts were insignificant during the 1990s. Third, in the 1990s, the UK (US) investors' behaviour during the bust appears to be consistent (inconsistent) with the leverage effects.

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  • Ming-Yuan Leon Li, 2009. "Multiple asymmetries in index stock returns from boom/bust and stable/volatile markets states- an empirical study of US and UK stock markets," Applied Economics Letters, Taylor & Francis Journals, vol. 16(2), pages 183-191.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:2:p:183-191
    DOI: 10.1080/13504850601018148
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    Cited by:

    1. Warren Dean & Robert Faff, 2011. "Feedback trading and the behavioural ICAPM: multivariate evidence across international equity and bond markets," Applied Financial Economics, Taylor & Francis Journals, vol. 21(22), pages 1665-1678.
    2. Li, Ming-Yuan Leon, 2009. "Value or volume strategy?," Finance Research Letters, Elsevier, vol. 6(4), pages 210-218, December.

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