The asymmetric behaviour of stock returns and volatilities: evidence from Chinese stock market

Abstract

This article investigates the partial adjustment process with asymmetries on Chinese stock index returns and volatilities. Rolling sample windows method is proper to capture evolving asymmetric behaviours of Chinese emerging stock market. The empirical evidence shows that index returns do have asymmetric adjustment behaviours in most of periods and the market tends to overreact to information contained in negative returns. No asymmetry volatility effect was present at the initial stages of the stock market. Along with the development of the market, the leverage effect are present.

Acknowledgement

This research was supported by the China National Social Science Fund 07CJL 014 and China National Science Fund 70671053, and also by the Fund for ‘Study on the Evolution of Complex Economic System and Behaviour Finance’ at ‘Innovation Center of Economic Transition and Development of Nanjing University’ of Ministry of Education, China.

Notes

¹The application has been performed for a window width of 1000 observations as well. The results, available upon request, are similar to the results reported in this article.