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Structural Breaks and Volatility Persistence of Stock Returns: Evidence from the US and UK Equity Markets

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  • Chikashi Tsuji

Abstract

This paper quantitatively investigates the effects of structural breaks on stock return volatility persistence by using the US and UK stock market index return data. Applying two kinds of representative univariate GARCH models of standard GARCH and EGARCH models, we derive the following interesting findings. (1) First, we find that for both the US and UK stock market returns, the volatility persistence parameter values of standard GARCH models decrease when structural breaks are taken into account. (2) Second, we further reveal that for both the US and UK stock market returns, the volatility persistence parameter values of EGARCH models again decline when structural breaks are taken into consideration.

Suggested Citation

  • Chikashi Tsuji, 2018. "Structural Breaks and Volatility Persistence of Stock Returns: Evidence from the US and UK Equity Markets," Applied Economics and Finance, Redfame publishing, vol. 5(6), pages 76-83, November.
    • Handle: RePEc:rfa:aefjnl:v:5:y:2018:i:6:p:76-83
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    References listed on IDEAS

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    1. Salisu, Afees A. & Fasanya, Ismail O., 2013. "Modelling oil price volatility with structural breaks," Energy Policy, Elsevier, vol. 52(C), pages 554-562.
    2. Gil-Alana, Luis A. & Chang, Shinhye & Balcilar, Mehmet & Aye, Goodness C. & Gupta, Rangan, 2015. "Persistence of precious metal prices: A fractional integration approach with structural breaks," Resources Policy, Elsevier, vol. 44(C), pages 57-64.
    3. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    4. Chikashi Tsuji, 2014. "Japanese Stock Markets and the US Stock Price Index Ratios," Applied Economics and Finance, Redfame publishing, vol. 1(2), pages 37-47, November.
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    Cited by:

    1. Lorraine Muguto & Paul-Francois Muzindutsi, 2022. "A Comparative Analysis of the Nature of Stock Return Volatility in BRICS and G7 Markets," JRFM, MDPI, vol. 15(2), pages 1-27, February.

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