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Volatility Shifts and Persistence in Variance: Evidence from the Sector Indices of Istanbul Stock Exchange

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  • Efe Çağlar Çağli

    ()
    (Dokuz Eylul University, Faculty of Business Administration, Department of Finance, Kaynaklar Campus, 35160 Izmir, Turkey)

  • Pinar Evrim Mandaci

    ()
    (Dokuz Eylul University, Faculty of Business Administration, Department of Finance, Kaynaklar Campus, 35160 Izmir, Turkey)

  • Pinar Hakan Kahyaoğlu

    ()
    (Dokuz Eylul University of Economics and Administrative Sciences, Department of Economics, Dokuzcesmeler Campus, 35160 Izmir, Turkey)

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    Abstract

    This study examines the impact of volatility shifts on volatility persistence for three major sector indices of Istanbul Stock Exchange (ISE) and ISE National 100 index over the period beginning from 1997 and ending in 2009. The exponential generalized autoregressive conditional heteroskedasticity (EGARCH) model is extended by taking account of the volatility shifts which are determined by using iterated cumulative sums of squares (ICSS) and modified ICSS algorithms such as Kappa-1 (κ-1) and Kappa-2 (κ-2). The results indicate that the inclusion of volatility shifts in the model substantially reduces volatility persistence and suggest that the sudden shifts in volatility should not be ignored in modelling volatility for Turkish sector indices.

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    File URL: http://www.ijesar.org/docs/volume4_issue3/volatility_shifts_istanbul.pdf
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    Bibliographic Info

    Article provided by Technological Educational Institute (TEI) of Kavala, Greece in its journal International Journal of Economic Sciences and Applied Research (IJESAR).

    Volume (Year): 4 (2011)
    Issue (Month): 3 (December)
    Pages: 119-140

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    Handle: RePEc:tei:journl:v:4:y:2011:i:3:p:119-140

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    Related research

    Keywords: Stock return volatility; volatility shifts; persistence; Turkish stock market;

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    1. Farooq Malik & Bradley Ewing & James Payne, 2005. "Measuring volatility persistence in the presence of sudden changes in the variance of Canadian stock returns," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 1037-1056, August.
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