Assessing the Impact of News on Volatility Using the News Impact Curve of EGARCH

Abstract

The news impact curve of EGARCH captures the asymmetric impact of negative news on volatility. It also captures the impact of large shocks, negative and positive. The interpretation of the curve is complicated by its composition, making it difficult to interpret its coefficients and the information in its terms. An attempt is made to simplify the interpretation of the coefficients of the EGARCH in order to capture the information in the specification. An example is used to illustrate the interpretation.