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Structural Changes of the Conditional Volatility of the Portuguese Stock Market

Author

Listed:
  • Benilde Maria do Nascimento Oliveira

    (University of Minho, Portuga)

  • Manuel Jose da Rocha Armada

    (University of Minho, Portugal)

Abstract

This paper examines the impact of the introduction of the futures market, on the volatility of the underlying Portuguese stock market. The simple analysis of variance is only the first step to a later undertaking of a much more robust methodology which involves the application of a GARCH model, with the main purpose of studying some potential changes on the structure of the conditional volatility of the Portuguese stock market. The results for the Portuguese market are not identical to those generally found internationally. The initial and simple analysis of variance seems to suggest a strong increase in the level of volatility. When a GARCH model is applied, with the main purpose of studying the evolution of the structure of the conditional volatility, a reduction in market efficiency, measured by its ability to quickly incorporate new information, is identified.

Suggested Citation

  • Benilde Maria do Nascimento Oliveira & Manuel Jose da Rocha Armada, 2005. "Structural Changes of the Conditional Volatility of the Portuguese Stock Market," Multinational Finance Journal, Multinational Finance Journal, vol. 9(3-4), pages 189-214, September.
    • Handle: RePEc:mfj:journl:v:9:y:2005:i:3-4:p:189-214
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Index futures; conditional volatility; information; GARCH;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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