This paper investigates the systematic impact of the European Monetary System EMS) on asymmetry in volatility of exchange rates vis-a-vis the Deutsche Mark. It seems plausible that the symmetric fluctuation band in the EMS affects asymmetric volatility and this id dominant at extreme returns. To...

While most asset pricing models postulate a positive relationship between excess returns and risk, there is no consensus on the nature of the relationship due to conflicting empirical evidence. The relationship is particularly ambiguous within a GARCH-M framework. This paper demonstrates that...

Besides the heterogeneity of agents’ beliefs, we perceive that, contrary to the constant short-term risk attitude of fundamentalists, the risk attitude for chartists varies over time due to psychological factors such as prospect theory’s reflection effect, which refers to the reversing of...

Since volatility is perceived as an explicit measure of risk, financial economists have long been concerned with accurate measures and forecasts of future volatility and, undoubtedly, the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model has been widely used for doing so....

This paper explains the concept of surprising information with a sign effect. Employing the mixture of distribution hypothesis (MDH), this paper also theoretically demonstrates that the effect of surprising information on the relationship between volatility and trading volume contrasts with that...

As a considerable source of asymmetry in return volatility, this paper introduces asymmetric herding and extends the continuous beliefs system to account for its asymmetry and derive the asymmetric herding parameters that are easily estimated by using a maximum likelihood method based on the...

Most asset returns exhibit high volatility and its persistence. Heuristically, this paper focuses on the role of surprising information in high volatility processes and indicates that dismissing surprising information may lead to considerable loss in forecast accuracy. In response, this paper...