Identifying Regime Changes In Market Volatility
AbstractA casual inspection of a graph of volatility indexes over time indicates that volatility has undergone infrequent, but significant, shifts in its average level. The purpose of this article is to test for multiple structural breaks in the mean level of market volatility measured by the VIX and VXO, and to identify statistically the dates of these mean shifts. We find evidence of three distinct periods: pre-1992, 1992-1997, and post-1997. We find that the mean volatility, as well as its standard deviation, was lowest during 1992-1997. Our findings provide statistical evidence consistent with popular beliefs that market volatility changes over time. 2006 The Southern Finance Association and the Southwestern Finance Association.
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Bibliographic InfoArticle provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.
Volume (Year): 29 (2006)
Issue (Month): 1 ()
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- N. Baba & Y. Sakurai, 2011. "Predicting regime switches in the VIX index with macroeconomic variables," Applied Economics Letters, Taylor and Francis Journals, vol. 18(15), pages 1415-1419.
- Sarwar, Ghulam, 2012. "Is VIX an investor fear gauge in BRIC equity markets?," Journal of Multinational Financial Management, Elsevier, vol. 22(3), pages 55-65.
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- Michael G Papaioannou & Joonkyu Park & Jukka Pihlman & Han van der Hoorn, 2013. "Procyclical Behavior of Institutional Investors During the Recent Financial Crisis: Causes, Impacts, and Challenges," IMF Working Papers 13/193, International Monetary Fund.
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