| Summary: | 碩士 === 國立東華大學 === 經濟學系 === 99 === This study investigates the effects of sudden changes precipitated by major events on the volatility clustering and asymmetric volatility of equity returns in the Hong Kong Stock Exchange (HKEX). Using the iterated cumulative sums of squares algorithm, we find a number of sudden changes in variance during the period 1986-2010. Not sur-prisingly, the identification of sudden changes in variance is generally associated with some financial crises or political events. In addition, two states of return are identified by the Markov-Switching model: one regime is high-mean, low-variance, i.e. a “Bull Market,” and another regime is low-mean, high-variance, i.e. a “Bear Market.” Of particular interest, both the volatility clustering and asymmetric volatility drop consis-tently when major events are taken into account in the HKEX. In other words, the high volatility clustering and high asymmetric volatility emphasized in the existing literature may actually result from neglecting the impacts of extreme events. In particular, the asymmetric volatility dramatically decreases in a Bear Market after incorporating these sudden changes in variance into the model.
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