Analyzing the structural behavior of volatility in the Major European Markets during the Greek crisis

Marcelo Righi () and Paulo Sergio Ceretta ()
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Paulo Sergio Ceretta: Universidade Federal de Santa Maria

Economics Bulletin, 2011, vol. 31, issue 4, 3016-3029

Abstract: In this paper we use a copula-based GARCH model to estimate conditional variances and covariances of the multivariate relationship among English, German and French markets. To that, we used daily prices of FTSE100, DAX and CAC from July 2009 to July 2011, totalizing 508 observations. The volatility of markets and their dependences indicate vestiges of the current European financial crisis, presenting a cluster of volatility and decrease of correlations near to dates of important events. Further, we used CUSUM, MOSUM and F tests to verify the presence of structural change in the volatility of these markets. The results allow concluding that the three markets had the same estimated break point, which coincided with start of Greek crisis. After the peak of turbulence, the risk of these markets returned to lower levels, so they can again be considered as relevant options for international diversification.

Keywords: Risk Management; Multivariate Volatility; Structural Change; European markets. (search for similar items in EconPapers)
JEL-codes: C1 G1 (search for similar items in EconPapers)
Date: 2011-10-24
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Citations: View citations in EconPapers (8)

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