Modelling asymmetry and persistence under the impact of sudden changes in the volatility of the Indian stock market

• Main Authors: Dilip Kumar, S. Maheswaran
• Format: Article
• Language: English
• Published: Elsevier 2012-09-01
• Series: IIMB Management Review
• Subjects: ICSS algorithm; GARCH class of models; Regime shifts; Volatility persistence; Volatility forecasting
• Online Access: http://www.sciencedirect.com/science/article/pii/S097038961200033X

In this paper, we compare the performance of Inclan and Tiao's (IT) (1994) and Sanso, Arago and Carrion's (AIT) (2004) iterated cumulative sums of squares (ICSS) algorithms by means of Monte Carlo simulation experiments for various data-generating processes with conditional and unconditional variance. In addition, we investigate the impact of regime shifts on the asymmetry and persistence of volatility from the vantage point of modelling volatility in general and, in particular, in assessing the forecasting ability of the GARCH class of models in the context of the Indian stock market.