Volatility Forecasting and Asymmetry Effect: Evidence from Dow Jones Sustainability Indices

Abstract

The present study seeks to examine the varied asymmetric effects of Dow Jones Sustainability indices (DJSI) over a period from 1998 to 2020. Here, the study period is divided into three sub-periods (pre-recession, recession, and post-recession). The study applies ARCH and GARCH approaches to observe the nature of volatilities and their effect on their daily return. The study reports presence of significant asymmetric shocks and persistence of conditional volatilities in the daily returns during all the sub-periods. Moreover, leverage effects exist in the returns during the sub-periods except DJSI US. It is also observed that EGARCH and TARCH measures are appropriate in pre-recession and recession periods, but GARCH is gainful in post-recession.