What would typically be the shape of the news impact curve for a series that exactly followed a GARCH(1,1) process?
A) It would be asymmetric, with a steeper curve on the left than the right
B) It would be asymmetric, with a steeper curve on the right than the left
C) It would be symmetric about zero
D) It would be discontinuous about zero

Question

Quizplus · Accepted Answer

The news impact curve for a series that exactly follows a GARCH(1,1) process is symmetric about zero. This is because the GARCH model, in its standard form, treats positive and negative shocks of the same magnitude equally, leading to a symmetric volatility response.

What Would Typically Be the Shape of the News Impact