Stock Return Volatility and World War II: Evidence from GARCH and GARCH-X Models
This paper investigates volatility in the stock markets of Canada, Denmark, Sweden, Switzerland, the United Kingdom and the United States, and the effects of short-run deviations between stock indices of these markets on the volatility during January 1926-December 1944. The empirical work is conducted by means of the GARCH(1,1) and GARCH(1,1)-X models. Both tests provide evidence of volatility clustering but low level of persistence to shocks to volatility. Results from GARCH-X also indicate a significant effect of the short-run deviations on volatility. The GARCH (1,1)-X model seems to perform better than the standard GARCH(1,1). Copyright @ 1997 by John Wiley & Sons, Ltd. All rights reserved.
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Volume (Year): 2 (1997)
Issue (Month): 1 (January)
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