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Volatility Switching in Shanghai Stock Exchange: Does regulation help reduce volatility?

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  • Zhang, Dayong
  • Dickinson, David
  • Barassi, Marco

Abstract

This paper investigates volatility switching in the Shanghai Stock Exchange (SSE hereafter,) using several recently developed techniques. They can be categorized into CUSUM type tests and Markov-Switching ARCH models. By detecting and dating switches with these models, we are able to show the volatility dynamics in SSE. Investigating the events in SSE around the switching date suggests that regulation improvements significantly reduce the volatility of the underlying market. Furthermore, the empirical results show that outliers can have significant impact on the conclusion and thus should properly be removed.

Suggested Citation

  • Zhang, Dayong & Dickinson, David & Barassi, Marco, 2008. "Volatility Switching in Shanghai Stock Exchange: Does regulation help reduce volatility?," MPRA Paper 70352, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:70352
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    References listed on IDEAS

    as
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    Cited by:

    1. Lucía Morales & Bernadette Andreosso-O’Callaghan, 2014. "Volatility analysis of precious metals returns and oil returns: An ICSS approach," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 38(3), pages 492-517, July.

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    More about this item

    Keywords

    Volatility switching; CUSUM test; Markov-Switching ARCH; Shanghai Stock Exchange; Outlier.;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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