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An analysis of the Swedish Stock Market Volatility with realized volatility, implied volatility and conditional times series models

Cabak, Alexandra LU (2011) NEKM07 20111
Department of Economics
Abstract
This study examines the response of the volatility in the Swedish stock market to positive and negative surprise return shocks. The study also explores the behaviour of the volatility following near-zero return shocks. To the author’s knowledge, this is the first study analysing the Swedish stock market volatility using two asymmetric econometric time series models, EGARCH and the GJR model, implied volatility and realized volatility. The results provide evidence that the volatility increases more after negative surprise return shocks than after positive shocks. While implied volatility and the time series models predict a large increase following negative shocks compared to positive shocks, realized volatility states a smaller increase to... (More)
This study examines the response of the volatility in the Swedish stock market to positive and negative surprise return shocks. The study also explores the behaviour of the volatility following near-zero return shocks. To the author’s knowledge, this is the first study analysing the Swedish stock market volatility using two asymmetric econometric time series models, EGARCH and the GJR model, implied volatility and realized volatility. The results provide evidence that the volatility increases more after negative surprise return shocks than after positive shocks. While implied volatility and the time series models predict a large increase following negative shocks compared to positive shocks, realized volatility states a smaller increase to negative shocks than to positive shocks compared to implied volatility. Likewise, following near-zero returns asymmetric time series models, implied and realized volatility indicate decreasing volatility. The Swedish stock market exhibits an asymmetric behaviour but the degree of asymmetry differs over different models. (Less)
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author
Cabak, Alexandra LU
supervisor
organization
course
NEKM07 20111
year
type
H2 - Master's Degree (Two Years)
subject
keywords
implied volatility, Asymmetric volatility, realized volatility, EGARCH, GJR-MODEL
language
English
id
2005684
date added to LUP
2011-06-29 13:29:34
date last changed
2011-06-29 13:29:34
@misc{2005684,
  abstract     = {This study examines the response of the volatility in the Swedish stock market to positive and negative surprise return shocks. The study also explores the behaviour of the volatility following near-zero return shocks. To the author’s knowledge, this is the first study analysing the Swedish stock market volatility using two asymmetric econometric time series models, EGARCH and the GJR model, implied volatility and realized volatility. The results provide evidence that the volatility increases more after negative surprise return shocks than after positive shocks. While implied volatility and the time series models predict a large increase following negative shocks compared to positive shocks, realized volatility states a smaller increase to negative shocks than to positive shocks compared to implied volatility. Likewise, following near-zero returns asymmetric time series models, implied and realized volatility indicate decreasing volatility. The Swedish stock market exhibits an asymmetric behaviour but the degree of asymmetry differs over different models.},
  author       = {Cabak, Alexandra},
  keyword      = {implied volatility,Asymmetric volatility,realized volatility,EGARCH,GJR-MODEL},
  language     = {eng},
  note         = {Student Paper},
  title        = {An analysis of the Swedish Stock Market Volatility with realized volatility, implied volatility and conditional times series models},
  year         = {2011},
}