Regime Switching: Italian Financial Markets over a Century
The frequency of crashes and the magnitude of crises in international financial markets are growing more severe over time. Recent financial crises are not singular events portrayed in recent accounts, rather, they erupt in circumstances that are very similar to the economic and financial environments of the earlier eras. This paper analyzes the Italian stock market in two very peculiar periods (1901-1911 and 1993-2004): the “Second” and the “Third Industrial Revolution”. We use Markov Switching Models to test whether the Italian stock market volatility has increased in the long run and if it can be represented by different volatility regimes. We find that volatility regimes exist; that Banking sector has a central role and “New Economy” sectors perform quite well while traditional sectors do not, in both periods.
|Date of creation:||May 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Viale G.B. Morgagni, 59 - I-50134 Firenze - Italy|
Phone: +39 055 2751500
Fax: +39 055 2751525
Web page: http://www.disia.unifi.it/
More information through EDIRC
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.:
- Brock, W. & Lakonishok, J. & Lebaron, B., 1991.
"Simple Technical Trading Rules And The Stochastic Properties Of Stock Returns,"
90-22, Wisconsin Madison - Social Systems.
- Brock, William & Lakonishok, Josef & LeBaron, Blake, 1992. " Simple Technical Trading Rules and the Stochastic Properties of Stock Returns," Journal of Finance, American Finance Association, vol. 47(5), pages 1731-64, December.
- Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
- 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.
- Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 51-82, 04.
- Giampiero M. Gallo & Edoardo Otranto, 2007.
"Volatility transmission across markets: a Multichain Markov Switching model,"
Applied Financial Economics,
Taylor & Francis Journals, vol. 17(8), pages 659-670.
- Giampiero Gallo & Edoardo Otranto, 2006. "Volatility Transmission Across Markets: A Multi-Chain Markov Switching Model," Econometrics Working Papers Archive wp2006_04, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
- Kim, Chang-Jin, 1994.
"Dynamic linear models with Markov-switching,"
Journal of Econometrics,
Elsevier, vol. 60(1-2), pages 1-22.
- Terence C. Mills & Ping Wang, 2003. "Multivariate Markov Switching Common Factor Models for the UK," Bulletin of Economic Research, Wiley Blackwell, vol. 55(2), pages 177-193, 04.
- Rabemananjara, R & Zakoian, J M, 1993. "Threshold Arch Models and Asymmetries in Volatility," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(1), pages 31-49, Jan.-Marc.
- Hamilton, James D., 1996. "Specification testing in Markov-switching time-series models," Journal of Econometrics, Elsevier, vol. 70(1), pages 127-157, January.
- Billio, Monica & Pelizzon, Loriana, 2000. "Value-at-Risk: a multivariate switching regime approach," Journal of Empirical Finance, Elsevier, vol. 7(5), pages 531-554, December.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- Michael D. Bordo & Antu P. Murshid, 2000. "Are Financial Crises Becoming Increasingly More Contagious? What is the Historical Evidence on Contagion?," NBER Working Papers 7900, National Bureau of Economic Research, Inc.
- Simon van Norden & Huntley Schaller & ), 1995.
"Regime Switching in Stock Market Returns,"
- Hamilton, James D. & Susmel, Raul, 1994.
"Autoregressive conditional heteroskedasticity and changes in regime,"
Journal of Econometrics,
Elsevier, vol. 64(1-2), pages 307-333.
- Tom Doan, . "RATS programs to estimate Hamilton-Susmel Markov Switching ARCH model," Statistical Software Components RTZ00083, Boston College Department of Economics.
- Baillie, Richard T. & Bollerslev, Tim & Mikkelsen, Hans Ole, 1996.
"Fractionally integrated generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 74(1), pages 3-30, September.
- Tom Doan, . "RATS programs to replicate Baillie, Bollerslev, Mikkelson FIGARCH results," Statistical Software Components RTZ00009, Boston College Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:fir:econom:wp2007_03. 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: (Francesco Calvori)
If references are entirely missing, you can add them using this form.