Leverage Effect In Chinese And American Index Returns

Abstract

A lot of changes have happened in the Chinese economy in the last three decades. To study whether these changes affect the symmetric or asymmetric behavior of the volatility in Chinese Stock Market, in this paper we analyze, first, the main stylized facts in similar Chinese and American index returns and, second, we compare the leverage effect of volatility in three different periods for these indexes.

The estimated results with GJR-GARCH and TA-ARSV models have shown that the behaviour of Chinese index returns was different depending on whether China was part of the Trade World Trade Organization (WTO).