Karanasos_1-s2.0-S0927539814000760-main.pdf (652.8 kB)
Download file

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

Download (652.8 kB)
journal contribution
posted on 02.11.2020, 13:36 authored by Menelaos Karanasos, Alexandros G Paraskevopoulos, Faek Menla Ali, Michail Karoglou, Stavroula Yfanti
© 2014. 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.

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of Empirical Finance

Volume

29

Pages

113 - 128

Publisher

Elsevier BV

Version

VoR (Version of Record)

Rights holder

© The authors

Publisher statement

This is an Open Access Article. It is published by Elsevier under the Creative Commons Attribution 3.0 Unported Licence (CC BY). Full details of this licence are available at: http://creativecommons.org/licenses/by/3.0/

Acceptance date

20/08/2014

Publication date

2014-08-28

Copyright date

2014

ISSN

0927-5398

eISSN

1879-1727

Language

en

Depositor

Stavroula Yfanti Deposit date: 30 October 2020