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Long-term vs. short-term comovements in stock markets: the use of Markov-switching multifractal models

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  • Julien Idier

Abstract

During financial crises, interest is strong for analysing market comovements. However, a majority of these analyses is based only on correlations. This article uses Markov switching multifractal models to derive new indicators by considering different horizons for dependency among four stock indices (NYSE FTSE DAX CAC) between 1996 and 2008. The detection of crises, extreme volatility comovements or the co-cycle lengths are derived. In this context, September 2008 appears to be an unprecedented example of global crisis, extended to all horizons and markets.

Suggested Citation

  • Julien Idier, 2011. "Long-term vs. short-term comovements in stock markets: the use of Markov-switching multifractal models," The European Journal of Finance, Taylor & Francis Journals, vol. 17(1), pages 27-48.
  • Handle: RePEc:taf:eurjfi:v:17:y:2011:i:1:p:27-48
    DOI: 10.1080/13518470903448440
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    Citations

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    Cited by:

    1. Aslanidis, Nektarios & Savva, Christos S., 2010. "Modelling Interbank Relations during the International Financial Crisis," Working Papers 2072/148475, Universitat Rovira i Virgili, Department of Economics.
    2. Christos S Savva, 2011. "Modeling interbank relations during the international financial crisis," Economics Bulletin, AccessEcon, vol. 31(1), pages 916-924.
    3. Segnon, Mawuli & Lux, Thomas, 2013. "Multifractal models in finance: Their origin, properties, and applications," Kiel Working Papers 1860, Kiel Institute for the World Economy (IfW).
    4. Paulo Horta & Carlos Mendes & Isabel Vieira, 2010. "Contagion effects of the subprime crisis in the European NYSE Euronext markets," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 9(2), pages 115-140, August.
    5. Humberto Valencia Herrera, 2011. "Value at Risk and Return from the Use of Bayesian Methods for Stress Testing in a World Asset Allocation and the 2008-2009 Crisis," Revista de Administración, Finanzas y Economía (Journal of Management, Finance and Economics), Tecnológico de Monterrey, Campus Ciudad de México, vol. 5(1), pages 33-49.
    6. repec:eee:ecmode:v:67:y:2017:i:c:p:136-148 is not listed on IDEAS
    7. Liu, Ruipeng & Lux, Thomas, 2010. "Flexible and robust modelling of volatility comovements: a comparison of two multifractal models," Kiel Working Papers 1594, Kiel Institute for the World Economy (IfW).

    More about this item

    Keywords

    multivariate volatility models; Markov switching multifractal model; transmission; comovements;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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