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Stock Market Cycles and Volatility Regime Switch

In: Anatomy of Global Stock Market Crashes

Author

Listed:
  • Gagari Chakrabarti

    (Presidency University)

  • Chitrakalpa Sen

    (G D Goenka World Institute)

Abstract

This chapter initiates the empirical dissection of stock market crises by an analysis of price movements and isolates two prominent stock market cycles over the study period. While the first cycle occurred during 1998–2005, a discernible second cycle took place from 2006 to 2011. The chapter analyzes the global trends around these cycles and explores the possible presence of intra- and inter-regional association and/or global financial integration. The intrinsic nature of different crises is further analyzed and compared in terms of volatility regime switch models where we inquire whether financial crises inevitably take the form of a structural break and whether such breaks follow some discernible pattern across the markets. The second cycle, rather than the first one appears to be truly ‘global’ and is marked by strong financial integration at the global level. Regional associations are however, not so robust. The association between financial crises and volatility breaks has been ambiguous and has varied from cycle to cycle. Such associations have been stronger over the second cycle where financial market changes have almost taken the form of volatility regime switch.

Suggested Citation

  • Gagari Chakrabarti & Chitrakalpa Sen, 2012. "Stock Market Cycles and Volatility Regime Switch," SpringerBriefs in Economics, in: Anatomy of Global Stock Market Crashes, edition 127, chapter 0, pages 7-25, Springer.
    • Handle: RePEc:spr:spbchp:978-81-322-0463-3_2
    DOI: 10.1007/978-81-322-0463-3_2
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    Cited by:

    1. Amélie Charles & Olivier Darné & Laurent Ferrara, 2018. "Does The Great Recession Imply The End Of The Great Moderation? International Evidence," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 745-760, April.
    2. Amélie Charles & Olivier Darné & Laurent Ferrara, 2018. "Does The Great Recession Imply The End Of The Great Moderation? International Evidence," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 745-760, April.

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