Cross-sectional distribution of GARCH coefficients across S&P 500 constituents
David Ardia & Lennart Hoogerheide
| Résumé |
We investigate the time-variation of the cross-sectional
distribution of asymmetric GARCH model parameters over the S&P 500
constituents for the period 2000-2012. We find the following
results. First, the unconditional variances in the GARCH model
obviously show major time-variation, with a high level after the
dot-com bubble and the highest peak in the latest financial crisis.
Second, in these more volatile periods it is especially the
persistence of deviations of volatility from its unconditional mean
that increases. Particularly in the latest financial crisis, the
estimated models tend to Integrated GARCH models, which can cope
with an abrupt regime-shift from low to high volatility levels.
Third, the leverage effect tends to be somewhat higher in periods
with higher volatility. Our findings are mostly robust across
sectors, except for the technology sector, which exhibits a
substantially higher volatility after the dot-com bubble. Further,
the financial sector shows the highest volatility during the latest
financial crisis. Finally, in an analysis of different market
capitalizations, we find that small cap stocks have a higher
volatility than large cap stocks where the discrepancy between
small and large cap stocks increased during the latest financial
crisis. Small cap stocks also have a larger conditional kurtosis
and a higher leverage effect than mid cap and large cap stocks. |
| Mots-clés |
GARCH;GJR;equity;leverage effect;S&P 500 universe |
| Citation | Ardia, D., & Hoogerheide, L. (2013). Cross-sectional distribution of GARCH coefficients across S&P 500 constituents. Wilmott Magazine, 66, 40-44. |
| Type | Article de périodique (Anglais) |
| Date de publication | 2013 |
| Nom du périodique | Wilmott Magazine |
| Volume | 66 |
| Pages | 40-44 |
| URL | http://onlinelibrary.wiley.com/doi/10.1002/wilm.10232/abs... |