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The Contagion Effect Between the Volatilities of the NASDAQ-100 and the IT.CA :A Univariate and A Bivariate Switching Approach

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  • Ryan SULEIMANN

    (ECOLE NORMALE SUPERIEURE DE CACHAN)

Abstract

This article uses models with changes in regime and conditional variance to show the presence of co-movement between the American and the French New Technology indexes, the NASDAQ-100 and the IT.CAC respectively. For the past two years, American and French New Technology stock markets have been fluctuating severely, and it has been observed that the IT.CAC is considerably affected by the NASDAQ- 100. In the first part of this article, we study the volatilities of those two IT indexes, using univariate conditional variance and changes in regime models. We show that the volatilities of the two indexes have considerably increased exhibiting a certain level of correlation. We find signs of a co-movement effect between the volatilities of the NASDAQ-100 and the IT.CAC. The hypothesis of a co-movement effect is discussed in the second part of this article, using a bivariate SWARCH model to show the dependence of the high and low volatility states of the IT.CAC on the NASDAQ-100, with no intermediate simultaneous high-low volatility states.

Suggested Citation

  • Ryan SULEIMANN, 2003. "The Contagion Effect Between the Volatilities of the NASDAQ-100 and the IT.CA :A Univariate and A Bivariate Switching Approach," Econometrics 0307002, EconWPA, revised 18 Jul 2003.
  • Handle: RePEc:wpa:wuwpem:0307002
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    Cited by:

    1. Ryan SULEIMANN, 2003. "New Technology Stock Market Indexes Contagion: A VAR-dccMVGARCH Approach," Econometrics 0307003, EconWPA, revised 18 Jul 2003.
    2. Ryan SULEIMANN, 2003. "Should Stock Market Indexes Time Varying Correlations Be Taken Into Account? A Conditional Variance Multivariate Approach," Econometrics 0307004, EconWPA, revised 18 Jul 2003.

    More about this item

    Keywords

    Conditional Variance; Regime Changes; New Technologies; Contagion; Volatility.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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