Hwang, Soosung and Satchell, S. (Stephen) (2001) GARCH model with cross-sectional volatility; GARCHX models. Working Paper. Warwick Business School, Financial Econometrics Research Centre, Coventry.

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Abstract

This study introduces GARCH models with cross-sectional market volatility, which we call GARCHX model. The cross-sectional market volatility is equlvalent to common heteroskedasticity in asset specific returns, which was suggested by Connor and Linton (2001) as an important component in individual asset volatility. Using UK and US data, we find that daily return volatility can be better specified with GARCHX models, but GARCHX models do not necessarily perform better than conventional GARCH models in forecasting.

Item Type:	Working or Discussion Paper (Working Paper)
Alternative Title:	Generalized autoregressive conditional heteroskedasticity model with cross-sectional volatility; GARCHX models
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Warwick Business School > Financial Econometrics Research Centre Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH):	Heteroscedasticity, Analysis of variance, Economic forecasting, Assets (Accounting)
Series Name:	Working papers (Warwick Business School. Financial Econometrics Research Centre)
Publisher:	Warwick Business School, Financial Econometrics Research Centre
Place of Publication:	Coventry
Date:	December 2001
Number:	No.01-
Number of Pages:	35
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/1812

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