THRESHOLD MODELING OF STOCK RETURN VOLATILITY ON EASTERN-EUROPEAN MARKETS

A common finding for developed stock markets is that negative shocks e ntering the market lead to a larger return volatility than positive sh ocks of a similar magnitude. The following paper considers two emergin g Eastern European Markets where the first point of investigation is w hether an analogous asymmetric characteristic is reflected in emerging markets. The second point of investigation is whether the findings di ffer depending on the institutional microstructure of the exchange bei ng examined. Hence, econometric techniques are adjusted and a 'double- censored tobit GARCH' model is developed. This paper finds that no asy mmetry exists on either markets and possible reasons for this are prop osed.