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The impact of sudden changes on the persistence of volatility: evidence from the BRIC countries

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  • Adnan Kasman

Abstract

This article analyses sudden changes of volatility in the stock markets of the BRIC countries (Brazil, Russia, India and China) using the iterated cumulative sums of squares algorithm for the period 1990 to 2007 and examines their impacts on the persistence of volatility. The results show that when endogenously determined sudden shifts in variance are taken into account in the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model, the estimated persistence in return volatility is reduced significantly in every return series. These results suggest that the findings of previous studies could have overestimated the degree of the persistence of volatility existing in the financial time series. These results have important policy implications for the financial market participants and policy makers.

Suggested Citation

  • Adnan Kasman, 2009. "The impact of sudden changes on the persistence of volatility: evidence from the BRIC countries," Applied Economics Letters, Taylor & Francis Journals, vol. 16(7), pages 759-764.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:7:p:759-764
    DOI: 10.1080/17446540802277138
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    Cited by:

    1. Charles, Amélie & Darné, Olivier, 2014. "Volatility persistence in crude oil markets," Energy Policy, Elsevier, vol. 65(C), pages 729-742.
    2. Charles, Amélie & Darné, Olivier, 2014. "Large shocks in the volatility of the Dow Jones Industrial Average index: 1928–2013," Journal of Banking & Finance, Elsevier, vol. 43(C), pages 188-199.
    3. Amanjot Singh, 2018. "A Note on Conditional Variance and Decaying Rate: Chinese Equity Market," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(2), pages 595-611, June.
    4. Todea, Alexandru & Platon, Diana, 2012. "Sudden Changes In Volatility In Central And Eastern Europe Foreign Exchange Markets," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 38-51, June.
    5. Morales, Lucía & Gassie, Esmeralda, 2011. "Structural breaks and financial volatility: Lessons from BRIC countries," IAMO Forum 2011: Will the "BRICs Decade" Continue? – Prospects for Trade and Growth 13, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
    6. Ye Fan & Zhicheng Zhang & Xiaoli Zhao & Haitao Yin, 2018. "Interaction between Industrial Policy and Stock Price Volatility: Evidence from China’s Power Market Reform," Sustainability, MDPI, vol. 10(6), pages 1-19, May.
    7. Lorraine Muguto & Paul-Francois Muzindutsi, 2022. "A Comparative Analysis of the Nature of Stock Return Volatility in BRICS and G7 Markets," JRFM, MDPI, vol. 15(2), pages 1-27, February.
    8. F. Dilvin Taşkin & Efe Çağlar Çağlı & Umut Halaç, 2016. "The impact of oil price shocks on the volatility of the Turkish stock market," International Journal of Accounting and Finance, Inderscience Enterprises Ltd, vol. 6(1), pages 1-23.
    9. Charles, Amélie & Darné, Olivier & Pop, Adrian, 2015. "Risk and ethical investment: Empirical evidence from Dow Jones Islamic indexes," Research in International Business and Finance, Elsevier, vol. 35(C), pages 33-56.
    10. Saleem, Kashif & Vaihekoski, Mika, 2010. "Time-varying global and local sources of market and currency risks in Russian stock market," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 686-697, October.
    11. KARGI, Bilal, 2014. "Structural Breakage and Long Term Cointegration Analysis for Economic Growth in G-7, BRICS and MATIK Countries (1962-2012)," MPRA Paper 57106, University Library of Munich, Germany.
    12. Francisco Jareño & Ana Escribano & Zaghum Umar, 2023. "The impact of the COVID-19 outbreak on the connectedness of the BRICS’s term structure," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-12, December.
    13. Hassan Heidari & Salih Turan Katircioglu & Sahar Bashiri, 2013. "Inflation, inflation uncertainty and growth in the Iranian economy: an application of BGARCH-M model with BEKK approach," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(5), pages 819-832, November.
    14. Ahmad Zubaidi Baharumshah & Akram Hasanov & Stilianos Fountas, 2011. "Inflation and inflation uncertainty: Evidence from two Transition Economies," Discussion Paper Series 2011_05, Department of Economics, University of Macedonia, revised Apr 2011.
    15. Kargi, Bilal, 2014. "Structural Breakage and Long-term Cointegration Analysis for Economic Growth in G-7, BRICS and MATIK Countries," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 13(4), pages 431-442.

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