 Volatility and Long-Term Relations in Equity Markets: Empirical Evidence from Germany, Switzerland, and the UKThe IUP Journal of Financial Economics, 2009, vol. VII, issue 2, 7-39 Abstract: This paper has two main objectives. First, it compares several Generalized Autoregressive Conditional Heteroskedasticity (GARCH) family models in order to model and forecast the conditional variance of German, Swiss and UK stock market indexes. Results obtained reveal that all GARCH family models show evidence of asymmetric effects. Based on the ‘out-of-sample’ forecasts, the paper finds the model that gives better volatility forecasts for each market index considered in this study. Second, it investigates a long-run relation between these markets using the cointegration methodology. Cointegration test results show that DAX 30, FTSE 100 and SMI indexes move together in the long run. The Vector Error Correction Model (VECM) indicates a positive long-run relation among these indexes, while the error correction terms indicate that the Swiss market is the initial receptor of external shocks. One of the main findings of this study is that although the UK, Switzerland and Germany do not share a common currency, diversification benefits of investing in these countries could be very low given that their stock markets seem to move together in the long run. Date: 2009 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjfe:v:07:y:2009:i:2:p:7-39 Access Statistics for this article More articles in The IUP Journal of Financial Economics from IUP Publications |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.