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How Persistent is Volatility? An Answer with Stochastic Volatility Models with Markov Regime Switching State Equations

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  • Soosung Hwang
  • Steve E. Satchell & Pedro L. Valls Pereira

Abstract

We introduce SV models with Markov regime changing state equation (SVMRS) to investigate the important properties of volatility, high persistence and smoothness. With the quasi-ML approach proposed in our study, we showed that volatility is far less persistent and smooth than the GARCH or SV models suggest

Suggested Citation

  • Soosung Hwang & Steve E. Satchell & Pedro L. Valls Pereira, 2004. "How Persistent is Volatility? An Answer with Stochastic Volatility Models with Markov Regime Switching State Equations," Econometric Society 2004 Latin American Meetings 198, Econometric Society.
    • Handle: RePEc:ecm:latm04:198
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    References listed on IDEAS

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    Cited by:

    1. Gilles Dufrenot & Dominique Guegan & Anne Peguin-Feissolle, 2008. "Changing-regime volatility: a fractionally integrated SETAR model," Applied Financial Economics, Taylor & Francis Journals, vol. 18(7), pages 519-526.
    2. Łukasz Kwiatkowski, 2010. "Markov Switching In-Mean Effect. Bayesian Analysis in Stochastic Volatility Framework," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 2(1), pages 59-94, January.

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    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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