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Large shocks in the volatility of the Dow Jones Industrial Average index: 1928–2013

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  • Amélie Charles

    () (Audencia Recherche - Audencia Business School)

  • Olivier Darné

    () (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - UN - Université de Nantes)

Abstract

We determine the events that cause large shocks in volatility of the DJIA index over the period 1928–2013, using a new semi-parametric test based on conditional heteroscedasticity models. We find that these large shocks can be associated with particular events (financial crashes, elections, wars, monetary policies, etc.). We show that some shocks are not identified as extraordinary movements by the investors due to their occurring during high volatility episodes, especially the 1929–1934, 1937–1938 and 2007–2011 periods.

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  • Amélie Charles & Olivier Darné, 2014. "Large shocks in the volatility of the Dow Jones Industrial Average index: 1928–2013," Post-Print hal-01122507, HAL.
  • Handle: RePEc:hal:journl:hal-01122507
    DOI: 10.1016/j.jbankfin.2014.03.022
    Note: View the original document on HAL open archive server: http://hal-audencia.archives-ouvertes.fr/hal-01122507
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    Keywords

    Volatility; Large shocks; Stock market;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G01 - Financial Economics - - General - - - Financial Crises
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-

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