Detecting jumps and regime-switches in international stock markets returns

Julien Chevallier and Stéphane Goutte

Working Papers from HAL

Abstract: This paper explores seven international stock markets (DJIA, Euro STOXX 600, Russell 2000, Nikkei, NASDAQ, FTSE, Global Dow) in the quest for jumps and regime-switches. The methodological framework borrows from the Markov-switching approach and the stochastic modelling literature based on Lévy processes. The econometric procedure is detailed in a two-step fashion. The dataset covers the period from June 2004 to July 2014. The main results uncover changing market dynamics according to economic and/or financial phenomena (e.g., economic crises/growth, news events) with the occurrence of several episodes characterized by a high jump intensity. We advocate the use of such a jump-robust model modulated by a Markov chain to further study the dependence structure of financial time series.

Keywords: Lévy Jumps; Markov-switching; Equity markets; Nasdaq; Euro STOXX; FTSE (search for similar items in EconPapers)
Date: 2014-11-04
Note: View the original document on HAL open archive server: https://hal.science/hal-01090833
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Citations: View citations in EconPapers (1)

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Journal Article: Detecting jumps and regime switches in international stock markets returns (2015)
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