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Stock Return Volatility and World War II: Evidence from GARCH and GARCH-X Models

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  • Choudhry, Taufiq

Abstract

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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  • Choudhry, Taufiq, 1997. "Stock Return Volatility and World War II: Evidence from GARCH and GARCH-X Models," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(1), pages 17-28, January.
  • Handle: RePEc:ijf:ijfiec:v:2:y:1997:i:1:p:17-28
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    Cited by:

    1. Su, Jung-Bin, 2014. "Empirical analysis of long memory, leverage, and distribution effects for stock market risk estimates," The North American Journal of Economics and Finance, Elsevier, vol. 30(C), pages 1-39.

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