The Dynamics of Stock Price Volatility : Empirical Evidence from Taiwan

• Main Authors: Shu-ya Chang, 張淑雅
• Other Authors: Song-Zan Chiou Wei
• Format: Others
• Language: en_US
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/41844734835068387877

碩士 === 南華大學 === 經濟學研究所 === 92 === This paper examines the volatility of daily stock market returns in Taiwan using a Markov Switching Autoregressive Conditional Heteroscedastic (SWARCH) model developed by Hamilton and Susmel (1994). Conventional ARCH models usually exist the highly persistence to conditional volatility but this persistence may be spurious if there is any structural change in the conditional volatility, such as policy changes or news events. We investigate the evolution of volatility persistence and the effect of regime shifts. Empirical results show that the SWARCH model provides a better description of the data, which implies a much lower degree of volatility persistence than conventional ARCH models. Furthermore, the volatility regimes identified by our model appear to correlate well with major events.