Stochastic Volatility in Peruvian Stock Market and Exchange Rate Returns: a Bayesian Approximation

Willy Alanya and Gabriel Rodríguez
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Willy Alanya: Departamento de Economía - Pontificia Universidad Católica del Perú

No 2014-392, Documentos de Trabajo / Working Papers from Departamento de Economía - Pontificia Universidad Católica del Perú

Abstract: This study is one of the rst to utilize the SV model to model Peruvian financial series, as well as estimating and comparing with GARCH models with normal and t-student errors. The analysis in this study corresponds to Perus stock market and exchange rate returns. The importance of this methodology is that the adjustment of the data is better than the GARCH models using the assumptions of normality in both models. In the case of the SV model, three Bayesian algorithms have been employed where we evaluate their respective ine ciencies in the estimation of the models parameters being the most e¢ cient the Integration sampler. The estimated parameters in the SV model under the various algorithms are consistent, as they display little ine¢ ciency. The Figures of the correlations of the iterations suggest that there are no problems at the time of Markov chaining in all estimations. We nd that the volatilities in exchange rate and stock market volatilities follow similar patterns over time. That is, when economic turbulence caused by the economic circumstances occurs, for example, the Asian crisis and the recent crisis in the United States, considerable volatility was generated in both markets. JEL Classification-JEL: C22

Keywords: Modelo de Volatilidad Estocástica; Estimación Bayesiana; Gibbs Sampler; Mixture Sampler; Integration Sampler; Mercado Bursátil; Mercado Cambiario; Modelos GARCH; Perú. (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Stochastic Volatility in the Peruvian Stock Market and Exchange Rate Returns: A Bayesian Approximation (2018)
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