An Alternative Asymmetric GARCH Model with an Application to Falling and Rising Stock Prices

    Research output: Chapter in Book/Report/Conference proceedingConference contribution

    Abstract

    Ever since the groundbreaking contribution of Engle [1], the ARCH (autoregression-conditional-heteroscedasticity) model has functioned as an essential instrument for assessing a time-based measure of financial risk. Various expansions of this approach have taken place in literature. The current work offers a complementary method for tackling potential asymmetric issues in risk models. Distinct from previous approaches to asymmetry, the current work proposes explicitly separating the negative price shocks from the positive ones when modeling time-dependent risk. A test method is recommended that can be used for testing the null hypothesis of no asymmetry in the risk measure. If the hypothesis of interest is not empirically supported, then the model might be estimated by using the maximum likelihood procedure. The proposed asymmetric risk approach is utilized for modeling the time-dependent risk for rising or falling stock prices in the world marketplace. The results have important implications for both sellers and buyers of stocks in terms of financial risk management.

    Original languageEnglish
    Title of host publicationProceedings - 27th International Conference on Circuits, Systems, Communications and Computers, CSCC 2023
    PublisherInstitute of Electrical and Electronics Engineers Inc.
    Pages54-58
    Number of pages5
    ISBN (Electronic)9798350337594
    DOIs
    Publication statusPublished - 2023
    Event27th International Conference on Circuits, Systems, Communications and Computers, CSCC 2023 - Rhodes Island, Greece
    Duration: Jul 19 2023Jul 22 2023

    Publication series

    NameProceedings - 27th International Conference on Circuits, Systems, Communications and Computers, CSCC 2023

    Conference

    Conference27th International Conference on Circuits, Systems, Communications and Computers, CSCC 2023
    Country/TerritoryGreece
    CityRhodes Island
    Period7/19/237/22/23

    Keywords

    • Asymmetric GARCH
    • Modelling risk
    • Testing hypothesis
    • World stock prices

    ASJC Scopus subject areas

    • Computer Networks and Communications
    • Hardware and Architecture
    • Information Systems
    • Electrical and Electronic Engineering
    • Industrial and Manufacturing Engineering
    • Control and Optimization
    • Modelling and Simulation

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