The impact of sudden changes on volatility persistence and asymmetry in Chinese stock markets



This study has investigated sudden changes of volatility and examined the volatility asymmetry and persistence for the Shanghai and Shenzhen indices. In an effort to assess the impact of sudden changes in volatility asymmetry and persistence, we identify the time points at which sudden changes in volatility occur, and then incorporate this information into the GARCH and GJR-GARCH models. Using the ICSS algorithm, we found that the identification of sudden changes is largely associated with domestic and global events. When these sudden changes are incorporated into GARCH and GJR-GARCH models, the evidences of asymmetry and persistence has been vanished in the volatility of both markets. In addition, out-ofsample analysis confirms that volatility models with incorporating sudden changes provide more accurate one-step-ahead volatility forecasts than their counterparts without sudden changes.


 1. Introduction
 2. Methodology
  2.1. Detecting points of sudden change in variance
  2.2. GARCH(1,1) and GJR-GARCH models
  2.3. Multiple sudden changes with GARCH and GJR-GARCH models
 3. Data and descriptive statistics
 4. Empirical results
  4.1. Sudden changes in variance
  4.2. GARCH and GJR-GARCH estimation with and without sudden changes
  4.3. Out-of-sample forecasts
 5. Conclusions


  • Sang Hoon Kang Assistant Professor, Division of Business Administration, Pusan National University
  • Seong-Min Yoon Professor, Department of Economics, Pusan National University


자료제공 : 네이버학술정보

    함께 이용한 논문

      ※ 기관로그인 시 무료 이용이 가능합니다.

      • 5,700원

      0개의 논문이 장바구니에 담겼습니다.