Factor analysis of a model of stock market returns using simulation-based estimation techniques
A dynamic latent factor model of stock market returns is estimated using simulation-based techniques. Stock market volatility is decomposed into common and idiosyncratic components, and volatility decompositions are compared between stable and turmoil periods to test for possible shift-contagion in equity markets during Asian financial crisis. Five core Asian emerging stock markets are analyzed—Thailand, Indonesia, Korea, Malaysia and the Philippines. Results identify the existence of shift-contagion during the crisis and indicate that the Thai market was a trigger for contagious shock transmission. ; Monte Carlo experiments are conducted to compare simulation method of moments and indirect inference estimation techniques. Consistent with the literature such experiments find that, in the presence of autocorrelation and time-varying volatility, indirect inference is a better method of conducting variance decomposition analysis for stock market returns than the conventional method of moments.
|Date of creation:||2001|
|Contact details of provider:|| Postal: 101 Market Street, MS 1130, San Francisco, CA 94105-1579|
Phone: (415) 974-3184
Fax: (415) 974-2168
Web page: http://www.frbsf.org/economics/pbc/
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- M. Ayhan Kose & Christopher Otrok & Charles H. Whiteman, 2003. "International Business Cycles: World, Region, and Country-Specific Factors," American Economic Review, American Economic Association, vol. 93(4), pages 1216-1239, September.
- Michaelides, Alexander & Ng, Serena, 2000.
"Estimating the rational expectations model of speculative storage: A Monte Carlo comparison of three simulation estimators,"
Journal of Econometrics,
Elsevier, vol. 96(2), pages 231-266, June.
- Alexander Michaelides & Serena Ng, 1997. "Estimating the Rational Expectations Model of Speculative Storage: A Monte Carlo Comparison of Three Simulation Estimators," Boston College Working Papers in Economics 373, Boston College Department of Economics.
- Alexander Michaelides & Serena Ng, 2000. "Estimating the rational expectations model of speculative storage : a Monte Carlo comparison of three simulation estimators," LSE Research Online Documents on Economics 198, London School of Economics and Political Science, LSE Library.
- Benoit Mandelbrot, 2015.
"The Variation of Certain Speculative Prices,"
World Scientific Book Chapters,
in: THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78
World Scientific Publishing Co. Pte. Ltd..
- Kee-Hong Bae & G. Andrew Karolyi & Rene M. Stulz, 2001.
"A new approach to measuring financial contagion,"
743, Federal Reserve Bank of Chicago.
- Harvey,Andrew C., 1991.
"Forecasting, Structural Time Series Models and the Kalman Filter,"
Cambridge University Press, number 9780521405737, December.
- Harvey,Andrew C., 1990. "Forecasting, Structural Time Series Models and the Kalman Filter," Cambridge Books, Cambridge University Press, number 9780521321969, December.
- Kristin J. Forbes & Roberto Rigobon, 2002.
"No Contagion, Only Interdependence: Measuring Stock Market Comovements,"
Journal of Finance,
American Finance Association, vol. 57(5), pages 2223-2261, October.
- Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
- Duffie, Darrell & Singleton, Kenneth J, 1993.
"Simulated Moments Estimation of Markov Models of Asset Prices,"
Econometric Society, vol. 61(4), pages 929-52, July.
- Darrell Duffie & Kenneth J. Singleton, 1990. "Simulated Moments Estimation of Markov Models of Asset Prices," NBER Technical Working Papers 0087, National Bureau of Economic Research, Inc.
- Smith, A A, Jr, 1993. "Estimating Nonlinear Time-Series Models Using Simulated Vector Autoregressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages S63-84, Suppl. De.
- Kaminsky, Graciela L. & Schmukler, Sergio L., 1999.
"What triggers market jitters?: A chronicle of the Asian crisis,"
Journal of International Money and Finance,
Elsevier, vol. 18(4), pages 537-560, August.
- Graciela L. Kaminsky & Sergio L. Schmukler, 1999. "What triggers market jitters: a chronicle of the Asian crisis," International Finance Discussion Papers 634, Board of Governors of the Federal Reserve System (U.S.).
- Kaminsky, Graciela L. & Schmukler, Sergio L., 1999. "What triggers market jitters? A chronicle of the Asian crisis," Policy Research Working Paper Series 2094, The World Bank.
- Ronald Mahieu & Peter Schotman, 1994.
"Neglected Common Factors in Exchange Rate Volatility,"
CEPR Financial Markets Paper
0041, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
- Mahieu, Ronald & Schotman, Peter, 1994. "Neglected common factors in exchange rate volatility," Journal of Empirical Finance, Elsevier, vol. 1(3-4), pages 279-311, July.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Andrew Harvey & Esther Ruiz & Neil Shephard, 1994. "Multivariate Stochastic Variance Models," Review of Economic Studies, Oxford University Press, vol. 61(2), pages 247-264.
- Gallant, A. Ronald & Hsieh, David & Tauchen, George, 1997.
"Estimation of stochastic volatility models with diagnostics,"
Journal of Econometrics,
Elsevier, vol. 81(1), pages 159-192, November.
- Gallant, A. Ronald & Hsieh, David & Tauchen, George, 1995. "Estimation of Stochastic Volatility Models with Diagnostics," Working Papers 95-36, Duke University, Department of Economics.
- Diebold, Francis X & Nerlove, Marc, 1989.
"The Dynamics of Exchange Rate Volatility: A Multivariate Latent Factor Arch Model,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 4(1), pages 1-21, Jan.-Mar..
- Francis X. Diebold & Marc Nerlove, 1986. "The dynamics of exchange rate volatility: a multivariate latent factor ARCH model," Special Studies Papers 205, Board of Governors of the Federal Reserve System (U.S.).
- Sebastian Edwards, 2000. "Interest Rates, Contagion and Capital Controls," NBER Working Papers 7801, National Bureau of Economic Research, Inc.
- Bansal, Ravi & Gallant, A. Ronald & Hussey, Robert & Tauchen, George, 1995. "Nonparametric estimation of structural models for high-frequency currency market data," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 251-287.
- Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
- Masih, Abul M. M. & Masih, Rumi, 1999. "Are Asian stock market fluctuations due mainly to intra-regional contagion effects? Evidence based on Asian emerging stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 7(3-4), pages 251-282, August.
- Amemiya, Takeshi, 1980. "Selection of Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(2), pages 331-54, June.
- Giancarlo Corsetti & Marcello Pericoli & Massimo Sbracia, 2001.
"Correlation Analysis of Financial Contagion: What One Should Know before Running a Test,"
Temi di discussione (Economic working papers)
408, Bank of Italy, Economic Research and International Relations Area.
- Giancarlo Corsetti & Marcello Pericoli & Massimo Sbracia, 2001. "Correlation Analysis of Financial Contagion: What One Should Know Before Running a Test," Working Papers 822, Economic Growth Center, Yale University.
When requesting a correction, please mention this item's handle: RePEc:fip:fedfpb:2001-08. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diane Rosenberger)
If references are entirely missing, you can add them using this form.