engleski

Comparison Between Response Dynamics in Transition and Developed Economies

In developed economies, the sign of the price increment influences the volatility in an asymmetric fashion---negative increments tend to result in larger volatility (increments with larger magnitudes), and positive increments result in smaller volatility. We explore whether this asymmetry extends from developed economies to European transition economies and, if so, how such asymmetry changes over time as these economies develop and mature. We analyze eleven European transition economies and compare the results to those obtained by analyzing U.S. market indices. Specifically, we calculate parameters that quantify both the volatility asymmetry and the strength of its dependence on prior increments. We find that, like their developed economy counterparts, almost all transition economy indices exhibit a significant volatility asymmetry, and the parameter $\gamma$ controlling asymmetry fluctuates more over time for transition economies. We also investigate how the association between volatility and volatility asymmetry varies by type of market. For developed economies, $\gamma$ experiences local minima during (i) ``Black Monday'' on 19 October 87, (ii) in 2002 during the {; ; ; \it dot-com}; ; ; bubble crash, and (iii) during the 2007--2009 global crisis, supporting the hypothesis of a negative correlation between volatility and volatility asymmetry. This behavior contrasts with transition economies, where $\gamma$ experiences local maxima during times of economic crisis.

process; volatility; asimmetry

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