Journal
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
Volume 388, Issue 17, Pages 3543-3550Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.physa.2009.05.028
Keywords
Volatility persistence; Sudden change; Regime shift; ICSS algorithm; FIGARCH
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Funding
- National Research Foundation of Korea [인06B1508, 과C6B1615] Funding Source: Korea Institute of Science & Technology Information (KISTI), National Science & Technology Information Service (NTIS)
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In this study, we have investigated sudden changes in volatility and re-examined the persistence of volatility in Japanese and Korean stock markets during 1986-2008. Using the iterated cumulative sums of squares (ICSS) algorithm, we have determined that the identification of sudden changes is generally associated with global financial and political events. We have also demonstrated that controlling sudden changes effectively reduces the persistence of volatility or long memory, and that incorporating information regarding Sudden changes in variance improves the accuracy of estimating volatility dynamics and forecasting future volatility for researchers and investors. (C) 2009 Elsevier B.V. All rights reserved.
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