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How Persistent is Volatility? An Answer with Stochastic Volatility Models with Markov Regime Switching State Equations

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  • Soosung Hwang
  • Steve E. Satchell & Pedro L. Valls Pereira

Abstract

We introduce SV models with Markov regime changing state equation (SVMRS) to investigate the important properties of volatility, high persistence and smoothness. With the quasi-ML approach proposed in our study, we showed that volatility is far less persistent and smooth than the GARCH or SV models suggest

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 Latin American Meetings with number 198.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:latm04:198

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Keywords: Stochastic Volatility; Markov Switching; Persistence;

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  1. Hwang, Soosung & Satchell, Stephen E., 2000. "Market risk and the concept of fundamental volatility: Measuring volatility across asset and derivative markets and testing for the impact of derivatives markets on financial markets," Journal of Banking & Finance, Elsevier, vol. 24(5), pages 759-785, May.
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Cited by:
  1. Łukasz Kwiatkowski, 2010. "Markov Switching In-Mean Effect. Bayesian Analysis in Stochastic Volatility Framework," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 2(1), pages 59-94, January.

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