Volatility Swings in the US Financial Markets
Giampiero Gallo () and
Edoardo Otranto ()
No 2012_03, Econometrics Working Papers Archive from Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti"
Empirical evidence shows that the dynamics of high frequency–based measures of volatility exhibit persistence and occasional abrupt changes in the average level. By looking at volatility measures for major indices, we notice similar patterns (including jumps at about the same time), with stronger similarities, the higher the degree of company capitalization represented in the indices. We adopt the recent Markov Switching Asymmetric Multiplicative Error Model to model the dynamics of the conditional expectation of realized volatility. This allows us to address the issues of a slow moving average level of volatility and of different dynamics across regimes. An extension sees a more flexible model combining the characteristics of Markov Switching and smooth transition dynamics.
Keywords: Multiplicative Error Models; regime switching; realized volatility; volatility persistence; smooth transition (search for similar items in EconPapers)
JEL-codes: C22 C51 C52 C58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk
Date: 2012-07, Revised 2012-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://local.disia.unifi.it/ricerca/pubblicazioni/ ... s/2012/wp2012_03.pdf Revision 2012-07 (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fir:econom:wp2012_03
Access Statistics for this paper
More papers in Econometrics Working Papers Archive from Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti" Viale G.B. Morgagni, 59 - I-50134 Firenze - Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Francesco Calvori (). This e-mail address is bad, please contact .