Naslov
Volatility Switching Between Two Regimes

Autori
Visković, Josip ; Arnerić, Josip ; Rozga, Ante

Izvornik
International journal of social science and humanity (2010-3646) 4 (2014), 3; 692-696

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
central and east european countries ; financial crisis ; Markov switching GARCH model ; trasition probabilities

Sažetak
The first autoregressive conditional heteroscedasticity model (ARCH) was proposed as in [1]. The ARCH model was extended by its generalized version (GARCH) as in [2]. However, GARCH(1, 1) model usually indicate high persistence in the conditional variance, which may originate from structural changes in the variance process. Hence the estimates of a GARCH model suffer from a substantial upward bias in the persistence parameters. Therefore, models in which the parameters are allowed to change over time may be more appropriate for volatility modeling. The main feature of regime switching model is the possibility for some or all the parameters of the model to switch across different regimes according to a Markov process, which is governed by a state variable. Markov regime switching GARCH models allow different speeds of mean reversion of innovation process different levels of variance in different time periods. Hence, in this paper Markov regime switching GARCH model, i.e. MRS- GARCH(1, 1) is analyzed to describe structural changes in returns of referent stock indices caused by financial crisis at six stock markets from six different central and east European countries: Zagreb Stock Exchange (CROBEX), Prague Stock Exchange (PX 50), Budapest Stock Exchange (BUX), Ljubljana Stock Exchange (SBI 20), Bucharest Stock Exchange (BETI) and Sofia Stock Exchange (SOFIX).

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

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