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A study of the German bubble and the DAX index volatility persistence: FIGARCHS and economical growth

Author

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  • Houssam Boughabi

    (National Institute of Statistics and Applied Economics)

Abstract

This research investigates the intricate relationship between stock market fluctuations, particularly the DAX index, and macroeconomic indicators, such as German real GDP, during periods characterized by market bubbles. We extend the Johansen-Ledoit-Sornette (JLS) model by integrating fractional Brownian motion to effectively capture the long-memory properties inherent in volatility. Utilizing a FIGARCH (1,d,1) framework, our analysis reveals persistent volatility patterns within the DAX during speculative phases. Furthermore, we explore the impact of stock price movements on real GDP, demonstrating that sustained volatility significantly influences macroeconomic performance. Our findings highlight the necessity of considering financial market volatility in forecasting long-term economic stability, emphasizing the interdependence of financial markets and economic indicators in contemporary economic analysis. The result was further confirmed after being applied to the NASDAK index, the result is consistent with our finding.

Suggested Citation

  • Houssam Boughabi, 2025. "A study of the German bubble and the DAX index volatility persistence: FIGARCHS and economical growth," SN Business & Economics, Springer, vol. 5(6), pages 1-14, June.
    • Handle: RePEc:spr:snbeco:v:5:y:2025:i:6:d:10.1007_s43546-025-00827-6
    DOI: 10.1007/s43546-025-00827-6
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    More about this item

    Keywords

    Stock market bubbles; Fractional Brownian motion; DAX volatility; Macroeconomic impact; Memory of the market;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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