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The Asian financial crisis : the start of a regime switch in volatility

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  • GIOT, Pierre

Abstract

Using a Markov switching model applied to the VIX and VDAX implied volatility indexes, we find that the volatility of the U.S. S&P100 index and German DAX index switched from a low-value state to a high-value state around the events of the Asian financial crisis. Moreover, the U.S. and German markets have stayed in the highvolatility state for the next five years. We also show that there has been a structural change in the stock index volatility vs returns relationship.

Suggested Citation

  • GIOT, Pierre, 2003. "The Asian financial crisis : the start of a regime switch in volatility," LIDAM Discussion Papers CORE 2003078, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2003078
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    References listed on IDEAS

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    Cited by:

    1. Vivian, Andrew & Wohar, Mark E., 2012. "Commodity volatility breaks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(2), pages 395-422.
    2. Hiroyuki Okawa, 2023. "Markov-Regime Switches in Oil Markets: The Fear Factor Dynamics," JRFM, MDPI, vol. 16(2), pages 1-20, January.
    3. Luc Bauwens & Dagfinn Rime & Genaro Sucarrat, 2008. "Exchange rate volatility and the mixture of distribution hypothesis," Studies in Empirical Economics, in: Luc Bauwens & Winfried Pohlmeier & David Veredas (ed.), High Frequency Financial Econometrics, pages 7-29, Springer.

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