| Summary: | 碩士 === 國立臺灣大學 === 財務金融學研究所 === 93 === This paper examines the dynamic relations between return and volatility series under the assumption of closed form GARCH model. A multiple hypotheses testing method is employed to identify causal relations between the two series and to test the empirical implication of the assumption of Heston and Nandi (2000) on GARCH option pricing model. The international empirical results show that returns and volatility series do not perfectly correlated instantaneously, that is contemporaneous relation. There exists unidirectional, return lead volatility, or feedback relation; two series are cross-correlated by past information. Different GARCH models also have the same result. It is found that return leads volatility. This result help explain why HN model has inferior performance in some option application, such as hedging.
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