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Regime Switching: Italian Financial Markets over a Century

Margherita Velucchi ()

Econometrics Working Papers Archive from Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti"

Abstract: The frequency of crashes and the magnitude of crises in international financial markets are growing more severe over time. Recent financial crises are not singular events portrayed in recent accounts, rather, they erupt in circumstances that are very similar to the economic and financial environments of the earlier eras. This paper analyzes the Italian stock market in two very peculiar periods (1901-1911 and 1993-2004): the “Second” and the “Third Industrial Revolution”. We use Markov Switching Models to test whether the Italian stock market volatility has increased in the long run and if it can be represented by different volatility regimes. We find that volatility regimes exist; that Banking sector has a central role and “New Economy” sectors perform quite well while traditional sectors do not, in both periods.

Keywords: Markov Switching Models; Volatility Regimes; Second and Third Industrial Revolutions (search for similar items in EconPapers)
JEL-codes: C22 C51 C53 (search for similar items in EconPapers)
Date: 2007-05
New Economics Papers: this item is included in nep-his
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Journal Article: Regime switching: Italian financial markets over a century (2009) Downloads
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