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This paper presents empirical evidence on the effectiveness of eight different parametric ARCH models in describing daily stock returns. Twenty‐seven years of UK daily data on a broad‐based value weighted stock index are investigated for the period 1971–97. Several interesting results are documented. Overall, the results strongly demonstrate the utility of parametric ARCH models in describing time‐varying volatility in this market. The parameters proxying for asymmetry in models that recognize the asymmetric behaviour of volatility are highly significant in each and every case. However, the ‘performance’ of the various parameterizations is often fairly similar with the exception of the multiplicative GARCH model that performs qualitatively differently on several dimensions of performance. The outperformance of any model(s) is not consistent across different sub‐periods of the sample, suggesting that the optimal choice of a model is period‐specific. The outperformance is also not consistent as we change from in‐sample inferences to out‐of‐sample inferences within the same period. Copyright © 2000 John Wiley & Sons, Ltd.

This paper provides empirical evidence on the stock return sensitivity of a sample of Australian companies, to changes in the trade weighted index value of the Australian dollar during the post float period January, 1984 ‐ December, 1989. Exposure is estimated using time series regression methods. While the evidence of exposure is generally weak, there is evidence that resource stocks and industrial stocks respond differentially to fluctuations in the Australian dollar.

Important financial risks facing the airline industry include interest-rate, currency and fuel-price risk. This paper estimates the exposure to these risks within the airline industry of Australia and New Zealand, using both linear and non-linear specifications, for a variety of horizon lengths. Evidence for exposure, both symmetric and asymmetric, tends to strengthen as the return horizon is lengthened. Exposure to these financial risks is largely unchanged by the terrorist attacks and the collapse of a major competitor in September 2001.

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