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Sudden changes in volatility: The case of five central European stock markets

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  • Wang, Ping
  • Moore, Tomoe

Abstract

This paper investigates sudden changes in volatility in the stock markets of new European Union (EU) members by utilizing the iterated cumulative sums of squares (ICSS) algorithm. Using weekly data over the sample period 1994-2006, the time period of sudden change in variance of returns and the length of this variance shift are detected. A sudden change in volatility seems to arise from the evolution of emerging stock markets, exchange rate policy changes and financial crises. Evidence also reveals that when sudden shifts are taken into account in the GARCH models, the persistence of volatility is reduced significantly in every series. It suggests that many previous studies may have overestimated the degree of volatility persistence existing in financial time series.

Suggested Citation

  • Wang, Ping & Moore, Tomoe, 2009. "Sudden changes in volatility: The case of five central European stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(1), pages 33-46, February.
  • Handle: RePEc:eee:intfin:v:19:y:2009:i:1:p:33-46
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    References listed on IDEAS

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    1. Suk-Joong Kim & Fari Moshirian & Eliza Wu, 2018. "Dynamic Stock Market Integration Driven by the European Monetary Union: An Empirical Analysis," World Scientific Book Chapters,in: Information Spillovers and Market Integration in International Finance Empirical Analyses, chapter 10, pages 305-368 World Scientific Publishing Co. Pte. Ltd..
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