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Stock market volatility in the Philippines


  • C. C. Bautista


Regime-switching-ARCH regression was used on weekly aggregate Philippine stock return data from February 1987 to October 2000 to estimate its conditional variance. The estimated volatility was then related to major political/economic events and to fluctuations in economic activity as measured by real GDP growth. Four high volatility episodes were observed for the period under study. It was seen that high stock return volatility preceded a bust cycle, defined as a sequence of low growth periods. The study showed the sensitivity of the Philippine stock market to drastic changes in the political environment as well. This was observed twice during the late 1980s when a series of military coup attempts led to large fluctuations in the stock price index. In the 1990s, high return volatility was also observed twice. The lifting of the remaining foreign exchange and capital account restrictions in 1993 led to the third high volatility episode. In 1997, the start of the fourth volatility episode preceded the onset of the Asian financial crisis by a few months.

Suggested Citation

  • C. C. Bautista, 2003. "Stock market volatility in the Philippines," Applied Economics Letters, Taylor & Francis Journals, vol. 10(5), pages 315-318, April.
  • Handle: RePEc:taf:apeclt:v:10:y:2003:i:5:p:315-318
    DOI: 10.1080/13504850210148107

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    References listed on IDEAS

    1. Carlos C. Bautista, 2002. "Boom-Bust Cycles and Crisis Periods in the Philippines : A Regime-Switching Analysis," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 39(1), pages 20-37, June.
    2. Geert Bekaert & Campbell R. Harvey, 2000. "Capital Flows and the Behavior of Emerging Market Equity Returns," NBER Chapters,in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 159-194 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Wisniewski, Tomasz Piotr, 2016. "Is there a link between politics and stock returns? A literature survey," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 15-23.
    2. Carlos Bautista, 2005. "How volatile are East Asian stocks during high volatility periods?," Applied Economics Letters, Taylor & Francis Journals, vol. 12(5), pages 319-326.
    3. Abounoori, Esmaiel & Elmi, Zahra (Mila) & Nademi, Younes, 2016. "Forecasting Tehran stock exchange volatility; Markov switching GARCH approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 445(C), pages 264-282.
    4. Venus Khim-Sen Liew & Terence Tai-leung Chong, 2005. "Autoregressive Lag Length Selection Criteria in the Presence of ARCH Errors," Economics Bulletin, AccessEcon, vol. 3(19), pages 1-5.
    5. A. C. -L. Chian & E. L. Rempel & C. Rogers, 2007. "Crisis-induced intermittency in non-linear economic cycles," Applied Economics Letters, Taylor & Francis Journals, vol. 14(3), pages 211-218.
    6. repec:ebl:ecbull:v:3:y:2005:i:19:p:1-5 is not listed on IDEAS

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