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n African Finance Journal - An analysis of asymmetry in the conditional mean returns : evidence from three Sub-Saharan Africa emerging equity markets : finance letter

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Abstract

Asymmetric behavior of conditional volatility of stock returns has been widely documented. Conditional volatility of stock returns is asymmetric in the sense that negative shocks increase volatility more than positive shocks of an equal magnitude. Scant attention, however, has been given to possible asymmetries in the conditional mean. Using equity data from South Africa, Nigeria and Kenya, this paper examines the hypothesis that both the conditional mean and conditional variance of stock returns of the three markets respond asymmetrically to past shocks. The paper employs a time-varying asymmetric moving average threshold GARCH (asMA-TGARCH) model. The results indicate that both conditional mean and volatility are asymmetric functions of past innovations. However, conditional mean asymmetry is the reverse of that of volatility in the sense that good news has greater impact than bad news of equal magnitude.

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/content/finj/4/1/EJC33792
2002-01-01
2016-12-03
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