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Return volatility interval analysis of stock indexes during a financial crash

Author

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  • Li, Wei-Shen
  • Liaw, Sy-Sang

Abstract

We investigate the interval between return volatilities above a certain threshold q for 10 countries data sets during the 2008/2009 global financial crisis, and divide these data into several stages according to stock price tendencies: plunging stage (stage 1), fluctuating or rebounding stage (stage 2) and soaring stage (stage 3). For different thresholds q, the cumulative distribution function always satisfies a power law tail distribution. We find the absolute value of the power-law exponent is lowest in stage 1 for various types of markets, and increases monotonically from stage 1 to stage 3 in emerging markets.

Suggested Citation

  • Li, Wei-Shen & Liaw, Sy-Sang, 2015. "Return volatility interval analysis of stock indexes during a financial crash," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 434(C), pages 151-163.
    • Handle: RePEc:eee:phsmap:v:434:y:2015:i:c:p:151-163
    DOI: 10.1016/j.physa.2015.03.063
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    Cited by:

    1. Rui Menezes & Sonia Bentes, 2016. "Hysteresis and Duration Dependence of Financial Crises in the US: Evidence from 1871-2016," Papers 1610.00259, arXiv.org.
    2. Su, Zhi & Shu, Tengjia & Yin, Libo, 2018. "The pricing effect of the common pattern in firm-level idiosyncratic volatility: Evidence from A-Share stocks of China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 497(C), pages 218-235.

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