 GARCH, jumps and permanent and transitory components of volatility: the case of the Taiwan exchange rateShyh-Wei Chen and Chung-Hua Shen Mathematics and Computers in Simulation (MATCOM), 2004, vol. 67, issue 3, 201-216 Abstract: This paper investigates whether there are three distinctive features in financial asset prices, that is, time-varying conditional volatility, jumps and the component factors of volatility. It adopts a component-GARCH-Jump, which can efficiently capture the three features simultaneously. Our results demonstrate that the three features exist in the Taiwan exchange rate. Besides time-varying conditional volatility, our model identifies 172 jumps between 5 January 1988 and 21 March 2003. The empirical evidence shows that the permanent component of the conditional variance is a relatively smooth movement except for a fairly sharp shift which began in 1997. This means that the effect of the Asian crisis shock might very well have exerted not only a transitory jump effect, but also a permanent effect on Taiwan’s exchange rate. Keywords: Component model in volatiltiy; GARCH; Jump (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:67:y:2004:i:3:p:201-216 DOI: 10.1016/j.matcom.2004.06.006 Access Statistics for this article Mathematics and Computers in Simulation (MATCOM) is currently edited by Robert Beauwens More articles in Mathematics and Computers in Simulation (MATCOM) from Elsevier |
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