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Activity Number:
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84
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Type:
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Contributed
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Date/Time:
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Monday, August 9, 2004 : 8:30 AM to 10:20 AM
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Sponsor:
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Business and Economics Statistics Section
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| Abstract - #301493 |
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Title:
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On Examining Asymmetric Behavior of Price Limit Moves
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Author(s):
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Ping-Hung Hsieh*+ and J. Jimmy Yang
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Companies:
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Oregon State University and Oregon State University
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Address:
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200 Bexell, College of Business, Corvallis, OR, 97331-8527,
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Keywords:
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delayed price discovery ; MCMC ; spillover effect ; tail index
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Abstract:
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The development of statistical model in modeling asset returns with price limits has progressed to capture the dynamic price generating structure as well as the leftover effect that occurs when the equilibrium price is censored. In addition, recent empirical studies have observed asymmetric behavior between upper and lower price limits. That is, the price process hits one limit more often than the other. This observation has motivated us to develop a model that accounts for this additional feature. We consider a stochastic volatiity process that drives the underlying equilibrium returns and tailor the tails of the conditional distribution to allow asymmetric tail behavior. The model provides a measure that quantifies the asymmetric effect of price limits. Its financial implications such as the volatility spillover and delayed price discovery are addressed. A simulation study is conducted to gain insight into the performance of the proposed model with respect to several existing models. The proposed model is demonstrated with an application to stock market data.
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