The generalized asymmetric dynamic covariance model

In this paper we extend the ADC model of Kroner and Ng [1998. Review of Financial Studies 11, 817-844] such that it allows for cross-asymmetries in conditional volatility. That is, the model allows for asymmetries in covariances after shocks of opposite signs. We find evidence for significant cross-asymmetries in the conditional volatility in stock and bond markets.