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Overnight information and stochastic volatility : a study of European and US stock exchanges
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Tsiakas, Ilias (2008) Overnight information and stochastic volatility : a study of European and US stock exchanges. Journal of Banking & Finance, Vol.32 (No.2). pp. 251-268. doi:10.1016/j.jbankfin.2007.03.008 ISSN 0378-4266.
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Official URL: http://dx.doi.org/10.1016/j.jbankfin.2007.03.008
Abstract
This paper provides a comprehensive evaluation of the predictive ability of information accumulated during nontrading hours for a set of European and US stock indexes. We introduce a stochastic volatility model, which conditions on lagged overnight information, distinguishes between the nontrading periods of weeknights, weekends, holidays and long weekends, and allows for an asymmetric leverage effect on the impact of overnight news. We implement Bayesian methods for estimation and ranking of the empirical models, and find two key results: (i) there is substantial predictive ability in financial information accumulated during nontrading hours; and (ii) the performance of stochastic volatility models improves considerably by separating the asymmetric impact of positive and negative news made available over weeknights, weekends, holidays and long weekends. (c) 2007 Published by Elsevier B.V.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance Q Science > QA Mathematics |
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Divisions: | Faculty of Social Sciences > Warwick Business School | ||||
Library of Congress Subject Headings (LCSH): | Stochastic processes, Stock exchanges -- Mathematical models, Capital market -- Mathematical models, Bayesian statistical decision theory, Overnight funds -- United States -- Econometric models, Overnight funds -- Europe -- Econometric models | ||||
Journal or Publication Title: | Journal of Banking & Finance | ||||
Publisher: | Elsevier Science BV | ||||
ISSN: | 0378-4266 | ||||
Official Date: | February 2008 | ||||
Dates: |
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Volume: | Vol.32 | ||||
Number: | No.2 | ||||
Number of Pages: | 18 | ||||
Page Range: | pp. 251-268 | ||||
DOI: | 10.1016/j.jbankfin.2007.03.008 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Restricted or Subscription Access |
Data sourced from Thomson Reuters' Web of Knowledge
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