Modelling stock volatilities during financial crises:a time varying coefficient approach

Karanasos, Menelaos, Paraskevopoulos, Alexandros G., Menla Ali, Faek, Karoglou, Michail and Yfanti, Stavroula (2014). Modelling stock volatilities during financial crises:a time varying coefficient approach. Journal of Empirical Finance, 29 , pp. 113-128.

Abstract

We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two decades in the volatility dynamics, including the underlying volatility persistence and volatility spillover structure. Using daily data from several key stock market indices, the results of our bivariate GARCH models show the existence of time varying correlations as well as time varying shock and volatility spillovers between the returns of FTSE and DAX, and those of NIKKEI and Hang Seng, which became more prominent during the recent financial crisis. Our theoretical considerations on the time varying model which provides the platform upon which we integrate our multifaceted empirical approaches are also of independent interest. In particular, we provide the general solution for time varying asymmetric GARCH specifications, which is a long standing research topic. This enables us to characterize these models by deriving, first, their multistep ahead predictors, second, the first two time varying unconditional moments, and third, their covariance structure.

Publication DOI: https://doi.org/10.1016/j.jempfin.2014.08.002
Divisions: Aston Business School
Aston Business School > Economics finance & entrepreneurship
Additional Information: © 2014 Published by Elsevier B.V. Creative Commons Attribution 3.0 Unported (CC BY 3.0)
Uncontrolled Keywords: financial crisis,structural breaks,time varying GARCH models,volatility spillovers,Economics and Econometrics,Finance
Full Text Link:
Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
Published Date: 2014-12
Authors: Karanasos, Menelaos
Paraskevopoulos, Alexandros G.
Menla Ali, Faek
Karoglou, Michail ( 0000-0002-6730-504X)
Yfanti, Stavroula

Download

[img]

Version: Published Version

License: Creative Commons Attribution


Export / Share Citation


Statistics

Additional statistics for this record