IDEAS home Printed from https://ideas.repec.org/a/pal/assmgt/v4y2003i4d10.1057_palgrave.jam.2240108.html
   My bibliography  Save this article

GARCH models with changes in variance: An approximation to risk measurements

Author

Listed:
  • Vicent Aragó

    (Jaume University I, Campus del Riu Sec)

  • Ángeles Fernández-Izquierdo

    (Bachelor in Economics from Universitat de Valencia (Spain))

Abstract

This study aims to model volatility as an approximation to an optimum measurement of stock market risk because of the importance of this concept for, among other things, the proper management of portfolios. Following the proposal of Lamoureux and Lastrapes (1990), the authors consider that the high degree of persistence detected in GARCH models arises from a poor specification of the equation of the variance due to not considering the possible deterministic changes in the unconditional variance of the financial series. To determine the point in time as well as the duration of these changes, the proposal made by Inclan and Tiao (1994) is used. As an empirical application, whether or not the consideration of the changes obtained influences the diagram of conditional heteroscedasticity presented by the spot and futures series on the IBEX-35 index is tested for the Spanish stock market. The results show that the consideration of these changes considerably decreases the degree of persistence for the IBEX-35 index while, for its futures contract, the GARCH diagram disappears.

Suggested Citation

  • Vicent Aragó & Ángeles Fernández-Izquierdo, 2003. "GARCH models with changes in variance: An approximation to risk measurements," Journal of Asset Management, Palgrave Macmillan, vol. 4(4), pages 277-287, December.
    • Handle: RePEc:pal:assmgt:v:4:y:2003:i:4:d:10.1057_palgrave.jam.2240108
    DOI: 10.1057/palgrave.jam.2240108
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/palgrave.jam.2240108
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1057/palgrave.jam.2240108?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Charles, Amélie & Darné, Olivier, 2014. "Volatility persistence in crude oil markets," Energy Policy, Elsevier, vol. 65(C), pages 729-742.
    2. Richard T. A. Samuel & Charles Chimedza & Caston Sigauke, 2023. "Simulation Framework to Determine Suitable Innovations for Volatility Persistence Estimation: The GARCH Approach," JRFM, MDPI, vol. 16(9), pages 1-30, September.
    3. Malinda & Maya & Jo-Hui & Chen, 2022. "Testing for the Long Memory and Multiple Structural Breaks in Consumer ETFs," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 12(6), pages 1-6.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:assmgt:v:4:y:2003:i:4:d:10.1057_palgrave.jam.2240108. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.