Asymmetric information and stock returns: empirical evidence from eight Asian stock markets

Abstract

This paper is to investigate whether the Asian stock market returns adjust asymmetrically to past returns by allowing the conditional variance through time. First, we perform the standard GARCH model and find the ARCH and GARCH effects are very significant across all the Asian markets. Second, to employ the specification suggested by Glosten, Jagannathan, and Runkle ( 1993), we find the asymmetric effects on conditional variance, with the exception of the Indonesia, exist in the Asian stock markets. Third, we introduce a model to describe the return behavior to allow for not only asymmetric information on the conditional variance but on the conditional mean. The evidence shows that the conditional mean is also asymmetric function of past returns.