Asymmetric Volatility in the Stock Market and REITs and the Implied Heterogeneous Beliefs
Date Issued
2011
Date
2011
Author(s)
Lu, Tzu-Yu
Abstract
This study investigates the distinct characteristics of asymmetric volatility of the stock market and REITs by GJR-GARCH model. In particular, accounting for the regime shift points, this study divides the time series into several sub-periods by dynamic cumulative sums (DCS) algorithm to reveal the characteristics in some specific stages. In comparison, the stock market presents higher asymmetry than REITs. Meanwhile, the relationships between asymmetric volatility and the conditional return are clarified by estimating each detected sub-period piecewisely. Besides, this study develops a market mechanism based on market participants with heterogeneous beliefs: risk pricing and speculation. By this mechanism, the empirical observations in the stock market and REITs can be well explained respectively.
Subjects
Volatility
asymmetry
heterogeneous belief
Type
thesis
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