Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
958774 | Journal of Empirical Finance | 2007 | 11 Pages |
Abstract
This paper estimates a nonlinear, structural bivariate threshold model in order to identify independent temporary and permanent stock-price innovations in positive-return and negative-return regimes. The model finds that temporary innovations account for as much as 68% of the innovations after negative returns and less than 4% of the innovations after positive returns. This paper shows that the negative-return regime is also the high-volatility regime, a result that links the excess-volatility and asymmetric-volatility literatures. This link provides evidence that temporary stock-price innovations are due primarily to time-varying expected returns in an efficient market and not to a market inefficiency.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Philip A. Shively,