Structural Breakpoints in Volatility in International Markets
AbstractIn this article, we test for the presence of structural breaks in volatility by two alternative approaches: the Iterative Cumulative Sum of Squares (ICSS) algorithm and wavelet analysis. Specifically, we look at the effect of the outbreak of the Asian crisis and the terrorist attacks of September 11, 2001 on Emerging Asia, Europe, Latin America and North America's stock markets. In addition, we focus on the behavior of interest rates in Chile after the Central Bank switched its monetary policy interest rate from an inflationindexed to a nominal target in August 2001. Our estimation results show that the number of shifts detected by the two methods is substantially reduced when filtering out the data for both conditional heteroskedasticity and serial correlation. In addition, we conclude that the wavelet-based test tends to be more robust.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp076.
Date of creation: 15 Dec 2005
Date of revision:
ICSS algorithm; wavelet analysis; volatility breakpoints.;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-ETS-2006-01-24 (Econometric Time Series)
- NEP-FMK-2006-01-24 (Financial Markets)
- NEP-SEA-2006-01-24 (South East Asia)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ramsey James B. & Lampart Camille, 1998. "The Decomposition of Economic Relationships by Time Scale Using Wavelets: Expenditure and Income," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 3(1), pages 1-22, April.
- Ser-Huang Poon & Clive W.J. Granger, 2003. "Forecasting Volatility in Financial Markets: A Review," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 478-539, June.
- Lamoureux, Christopher G & Lastrapes, William D, 1990. "Persistence in Variance, Structural Change, and the GARCH Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 225-34, April.
- Aggarwal, Reena & Inclan, Carla & Leal, Ricardo, 1999. "Volatility in Emerging Stock Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(01), pages 33-55, March.
- Efe Çağlar Çağli & Pinar Evrim Mandaci & Pinar Hakan Kahyaoğlu, 2011. "Volatility Shifts and Persistence in Variance: Evidence from the Sector Indices of Istanbul Stock Exchange," International Journal of Economic Sciences and Applied Research (IJESAR), Technological Educational Institute (TEI) of Kavala, Greece, vol. 4(3), pages 119-140, December.
- Loh, Lixia, 2013. "Co-movement of Asia-Pacific with European and US stock market returns: A cross-time-frequency analysis," Research in International Business and Finance, Elsevier, vol. 29(C), pages 1-13.
- Bertrand B. Maillet & Jean-Philippe R. Médecin, 2010. "Extreme Volatilities, Financial Crises and L-moment Estimations of Tail-indexes," Working Papers 2010_10, Department of Economics, University of Venice "Ca' Foscari".
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Eva Mateo).
If references are entirely missing, you can add them using this form.