Impact Of Structural Shifts on Variance Persistence in Asymmetric Garch Models: Evidence From Emerging Asian and European Markets

Altaf Muhammad and Zhang Shuguang
Additional contact information
Altaf Muhammad: University of Science and Technology of China
Zhang Shuguang: University of Science and Technology of China

Romanian Statistical Review, 2015, vol. 63, issue 1, 57-70

Abstract: In this study we examined the effect of structural break points in conditional volatility on variance persistency of asymmetric GARCH models. We used Bai and Perron methodology to detect structural break points in conditional variance of daily stock returns of 7 emerging markets (4-European and 3-Asian) from 1997 to 2014. We implied Exponential GARCH or EGARCH and Threshold GARCH or T-GARCH models with and without sudden structural breaks and tried to evaluate persistency in variance and leverage effect while estimating conditional volatility. We concluded that persistence in variance reduces while considering regime shifts in conditional volatility of these models. The half-lives of shock to volatility significantly decline when we consider these sudden break points. Moreover by comparing these two models we concluded that T-GARCH model reduces persistency more gladly than EGARCH model when we account these sudden changes.

Keywords: Asymmetric GARCH; Leverage Effect; Shock life; Structural Break Points; Variance Persistency (search for similar items in EconPapers)
JEL-codes: C32 C58 G14 G15 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.revistadestatistica.ro/wp-content/uploads/2015/04/A4_RRS_01_2015.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsr:journl:v:63:y:2015:i:1:p:57-70

Access Statistics for this article

More articles in Romanian Statistical Review from Romanian Statistical Review Contact information at EDIRC.
Bibliographic data for series maintained by Adrian Visoiu ().