A Markov regime-switching model of stock return volatility: Evidence from Chinese markets

Thomas C. Chiang, Zhuo Qiao, Wing Keung WONG

Research output: Chapter in book/report/conference proceedingChapterpeer-review

Abstract

This chapter presents a regime switching GARCH model (RS-GARCH) to examine the volatile behavior and volatility linkages among the four major segmented Chinese stock indices. We find evidence of a regime shift in the volatility of the four markets, and the RS-GARCH model appears to outperform the single regime GARCH model. The evidence suggests that B-share markets are more volatile and shift more frequently between high- and low-volatility states. B-share markets are found to be more sensitive to international shocks, while A-share markets seem immune to international spillovers of volatility. Also, volatility linkages among the four segmented markets are regime-dependent.

Original languageEnglish
Title of host publicationNonlinear Financial Econometrics
Subtitle of host publicationMarkov Switching Models, Persistence and Nonlinear Cointegration
PublisherPalgrave Macmillan
Pages49-73
Number of pages25
ISBN (Electronic)9780230295216
ISBN (Print)9780230283640
DOIs
Publication statusPublished - 1 Jan 2010

Scopus Subject Areas

  • Economics, Econometrics and Finance(all)
  • Business, Management and Accounting(all)

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