Please use this identifier to cite or link to this item: https://ir.iimcal.ac.in:8443/jspui/handle/123456789/3039
Title: Modeling persistence and long memory under the impact of regime shifts in the PIGS stock markets
Authors: Kumar, Dilip
Maheswaran, S.
Keywords: ICSS algorithm
GARCH class of models
Regime shifts
Volatility persistence
Volatility forecasting
Issue Date: Nov-2013
Publisher: Indian Institute of Management Calcutta, Kolkata
Series/Report no.: Vol.40;No.1-2
Abstract: This paper investigates the impact of regime shifts on the persistence and long memory characteristics of volatility from the vantage point of modeling volatility in the PIGS economies (Portugal, Italy, Greece, and Spain). We apply the AIT ICSS algorithm to identify the points of sudden changes in volatility and incorporate these sudden changes in the GARCH class of models (GARCH and FIGARCH models). Our findings indicate that when regime shifts in the unconditional variance are incorporated in the GARCH class of models, the estimated persistence and long memory fractional parameter in the volatility of returns exhibit a drastic decline. Furthermore, we find that sudden changes in the unconditional variance are largely associated with various macroeconomic events.
Description: Dilip Kumar, Institute for Financial Management and Research, 24, Kothari Road, Nungambakkam, Chennai, 600034, India; S. Maheswaran, Centre for Advanced Financial Studies, Institute for Financial Management and Research, 24, Kothari Road, Nungambakkam, Chennai, 600034, India
p.117-134
Issue Editor – Bhaskar Chakrabarti, IIM Calcutta, Kolkata, India
URI: https://doi.org/10.1007/s40622-013-0004-2
https://ir.iimcal.ac.in:8443/jspui/handle/123456789/3039
ISSN: 0304-0941 (print version) ; 2197-1722 (electronic version)
Appears in Collections:Issue 1 & 2, June-September 2013

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