Abstract
This paper proposes a three variable’s double threshold-GRACH model, and uses this model to discuss U.S., U.K. and Australian stock return volatilities on the influence of the Brazil’s stock market. The empirical result demonstrates that the three variable’s double threshold-GARCH(1, 1) model is indeed appropriate, and also the response to the Brazil stock market has an asymmetrical effect. The empirical result also shows the different influence of the good news and the bad news on the eight kinds of the proposed model. Therefore, the information of U.S., U.K. and Australian stock return volatilities is able to affect the Brazil stock market returns’ volatility.
Highlights
We know that the Brazil’s measure of area is fifth in the World
Brazil has an important role to play in the global economical financial system
Brazil has a close relationship with the U.S, the U.K. and the Australian based on the trade and the circulation of capital, and the Australian, the U.S and the U.K. are powerful global economical nations
Summary
We know that the Brazil’s measure of area is fifth in the World. The population of Brazil is fifth in the World. Among the financial time series non-linearity literature, Engle (1982) proposes the autoregressive conditionally heteroskedasticity (called ARCH) model and Bollerslev (1986) offers the generalization autoregressive conditionally heteroskedasticity (called GARCH) model. These kinds of models may catch the financial property that the variance is not a fixed characteristic. The conditional variance only changes along with the error term’s value change, and cannot go along with the error term’s positive and negative changes To improve this flaw, Nelson (1991) presents an exponential GARCH model and Glosten, Jaganathan and Runkle (1993) give a GJR-GARCH model.
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