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Structural Breaks, Asymmetry and Persistence of Stock Market Volatility: Evidence from Post-Revolution Tunisia

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  • Wafa Souffargi
  • Adel Boubaker

Abstract

This paper analyses the impact of political uncertainty on the volatility of the Tunisian stock market from November 2010 to February 2016. In particular, it examines structural breaks in the variance by using the Iterated Cumulative Sums of Squares (ICSS) and modified ICSS algorithms. Asymmetric GARCH models are then extended by taking account regime shifts. Our results suggest that Tunisian stock market volatility is sensitive to local and political events. Large shifts coincide with civil uprisings and periods of political turbulence during the democratic transition and argue that the relationship between volatility and returns reflects the common effects of political factors. Diagnostic tests emphasize the asymmetric volatility response to news. However, there is no evidence that taking into account regime shifts reduces the volatility persistence which leads to think that the Tunisian stock market is well controlled and supervised.

Suggested Citation

  • Wafa Souffargi & Adel Boubaker, 2022. "Structural Breaks, Asymmetry and Persistence of Stock Market Volatility: Evidence from Post-Revolution Tunisia," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(9), pages 1-51, September.
    • Handle: RePEc:ibn:ijefaa:v:14:y:2022:i:9:p:51
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    References listed on IDEAS

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    1. Aggarwal, Reena & Inclan, Carla & Leal, Ricardo, 1999. "Volatility in Emerging Stock Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(1), pages 33-55, March.
    2. Ajab A. Alfreedi & Zaidi Isa & Abu Hassan, 2012. "Regime shifts in asymmetric GARCH models assuming heavy-tailed distribution: evidence from GCC stock markets," Journal of Statistical and Econometric Methods, SCIENPRESS Ltd, vol. 1(1), pages 1-4.
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    Cited by:

    1. Josep Lluís Carrion-i-Silvestre & Andreu Sansó, 2023. ""Generalized Extreme Value Approximation to the CUMSUMQ Test for Constant Unconditional Variance in Heavy-Tailed Time Series"," IREA Working Papers 202309, University of Barcelona, Research Institute of Applied Economics, revised Jul 2023.

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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