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Deterministic Seasonal Volatility in a Small and Integrated Stock Market: The Case of Sweeden

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  • Berg, L.

Abstract

Using daily data for the Swedish stock market for almost the last two decades no distinct and firm deterministic seasonal pattern for the conditional volatility for the Swedish stock market has been found. The daily turnover in the Swedish stock market has an impact on and eliminates to some extent seasonal patterns in conditional volatility. The daily turnover is a proxy variable used to test the mixture distribution model. According to this model the conditional variance of returns will display a GARCH-pattern of behaviour if the number of trades on the stock market during a day are serially correlated. We can also conclude that a feedback from the US stock market to the conditional volatility in the Swedish market exists, and trading days particularly after holidays has a positive impact on the conditional volatility. The test of the model's s mean equation indicates that the Swedish stock market seems to become more and more information efficient, at least in its weak form, if the 1990's are compared with the 1980's.

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Bibliographic Info

Paper provided by Uppsala - Working Paper Series in its series Papers with number 2000:9.

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Length: 18 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:fth:uppaal:2000:9

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Postal: UPPSALA UNIVERSITY, DEPARTMENT OF ECONOMICS, S-751 20 UPPSALA SWEDEN.
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Keywords: FINANCIAL MARKET ; ECONOMIC MODELS;

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References

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  1. Tim Bollerslev & Robert J. Hodrick, 1992. "Financial Market Efficiency Tests," NBER Working Papers 4108, National Bureau of Economic Research, Inc.
  2. Lennart Berg & Johan Lyhagen, 1998. "Short and long-run dependence in Swedish stock returns," Applied Financial Economics, Taylor & Francis Journals, vol. 8(4), pages 435-443.
  3. Bollerslev, T. & Ghysels, E., 1994. "Periodic Autoregressive Conditional Heteroskedasticity," Cahiers de recherche 9408, Centre interuniversitaire de recherche en ├ęconomie quantitative, CIREQ.
  4. Jose Montalvo, 1999. "Volume versus GARCH effects reconsidered: an application to the Spanish Government Bond Futures Market," Applied Financial Economics, Taylor & Francis Journals, vol. 9(5), pages 469-475.
  5. Hansson, Bjorn & Hordahl, Peter, 1997. " Changing Risk Premia: Evidence from a Small Open Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 335-50, June.
  6. Bollerslev, Tim & Engle, Robert F. & Nelson, Daniel B., 1986. "Arch models," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 49, pages 2959-3038 Elsevier.
  7. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-55, January.
  8. Lamoureux, Christopher G & Lastrapes, William D, 1990. " Heteroskedasticity in Stock Return Data: Volume versus GARCH Effects," Journal of Finance, American Finance Association, vol. 45(1), pages 221-29, March.
  9. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  10. Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993. "On the relation between the expected value and the volatility of the nominal excess return on stocks," Staff Report 157, Federal Reserve Bank of Minneapolis.
  11. Andersen, Torben G, 1996. " Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Volatility," Journal of Finance, American Finance Association, vol. 51(1), pages 169-204, March.
  12. Berg, Lennart & Lyhagen, Johan, 1996. "Short and Long Run Dependence in Swedish Stock Returns," Working Paper Series 1996:19, Uppsala University, Department of Economics.
  13. Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
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