Abstract Title: Asymmetric volatility – how is it demonstrated in the various sectors of the stock market? Authors: Linus Alentun and Patrik Egléus Supervisor: Katarina Eriksson Background: Asymmetric volatility is a phenomenon that can occur in various financial assets. This can be defined by the fact that volatility and lagged return have a negative correlation in the stock market. This means that a negative market shock that affects the share price, increases volatility more than a positive shock of the same magnitude. No previous study to our knowledge has researched similarities and differences of asymmetric volatility in the various sectors of the stock market. Purpose: The main purpose of the thesis is to investigate whether there occurs asymmetric volatility in different sectors of the stock market and if so, to what extent. Further, the thesis has assessed whether there are similarities or differences between the sectors. Method: In this thesis, the asymmetric volatility amongst different stock market sectors is analyzed through the S&P 500’s eleven sector indexes. Through an E-GARCH model, the asymmetric volatility has been estimated. Also, NIC curves have been made to observe how asymmetry occurs. Conclusion: The results show that all sectors have a negative relationship between stock returns and volatility. However, there is a wide variety of levels of asymmetric volatility across the sectors. Our results show that the financial sector has the highest asymmetric effect and that utilities have the lowest asymmetric effect. Further investigation of company-specific, sector-specific, and behavioral finance factors that could explain the variety of the results found in this study, would be of interest to study to obtain a better understanding of the differences found. Keywords: asymmetric volatility; E-GARCH; stock market sectors; behavioral finance; efficient market hypothesis
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:liu-193073 |
| Date | January 2022 |
| Creators | Alentun, Linus, Egléus, Patrik |
| Publisher | Linköpings universitet, Institutionen för ekonomisk och industriell utveckling |
| Source Sets | DiVA Archive at Upsalla University |
| Language | Swedish |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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