Online Testing of Switching Volatility

David Bock ()
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David Bock: Göteborg University, Göteborg, Sweden

Chapter 6 in FindEcon Monograph Series: Advances in Financial Market Analysis, 2006, vol. 2, pp 99-120 from University of Lodz

Abstract: Chapter 6 presents the methods for online detection of a change in the unconditional volatility. A test based on a moving sum is proposed and evaluated. The test has a controlled asymptotic size, i.e. the false alarm probability during an infinitely long monitoring period is fixed. The effects of autoregression and conditional heteroscedasticity have been also addressed and a test that allows for heteroscedasticity has been proposed. The testing procedures are exemplified with the Hang Seng Index to see whether a shift during the Asian crises period could have been detected online.

Keywords: Stochastic Volatility Processes; Autoregression models; Financial markets (search for similar items in EconPapers)
JEL-codes: C01 E02 F00 G00 (search for similar items in EconPapers)
Date: 2006
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