Market efficiency, time‐varying volatility and the asymmetric effect in Amman stock exchange
Abstract
Purpose
The purpose of this paper is to empirically examine the market efficiency, asymmetric effect and time varying risk–return relationship for daily stock return of Amman Stock Exchange (ASE).
Design/methodology/approach
The Box–Jenkins selection model is used to determine the stochastic process of equity returns; the exponential generalized autogressive conditional heteroscedesticity (EGARCH) and threshhold autoregressive conditional heteroscedasticity in mean are utilized to measure the persistent of volatility, risk–return relationship and volatility magnitude to bad and good news.
Findings
The univariate statistics show negative skewness, excess kurtosis and deviation from normality for the ASE index. The results show that stock return follows an ARMA (1, 1) stochastic process with significant serial correlation, implying stock market inefficiency. The results also show significant positive relationship between equity return and risk in the ASE, which is consistent with the portfolio theory. The EGARCH model suggests the existence of the asymmetric effect.
Originality/value
The paper offers insights into market efficiency, time‐varying volatility and asymmetric effect in the ASE.
Keywords
Citation
Al‐Zoubi, H. and Bashir Kh.Al‐Zu’bi, B. (2007), "Market efficiency, time‐varying volatility and the asymmetric effect in Amman stock exchange", Managerial Finance, Vol. 33 No. 7, pp. 490-499. https://doi.org/10.1108/03074350710753762
Publisher
:Emerald Group Publishing Limited
Copyright © 2007, Emerald Group Publishing Limited