A Markov Regime-Switching Model of Stock Return Volatility: Evidence from Chinese Markets

Thomas C. Chiang; Zhuo Qiao; Wing Keung Wong

doi:10.1057/9780230295216_3

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 proceeding › Chapter › peer-review

1 Citation (Scopus)

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 language	English
Title of host publication	Nonlinear Financial Econometrics
Subtitle of host publication	Markov Switching Models, Persistence and Nonlinear Cointegration
Editors	Greg N. Gregoriou, Razvan Pascalau
Place of Publication	London
Publisher	Palgrave Macmillan
Pages	49-73
Number of pages	25
Edition	1st
ISBN (Electronic)	9780230295216
ISBN (Print)	9780230283640, 9781349328949
DOIs	https://doi.org/10.1057/9780230295216_3
Publication status	Published - 1 Jan 2010

Scopus Subject Areas

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

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10.1057/9780230295216_3

Cite this

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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.",

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A Markov Regime-Switching Model of Stock Return Volatility: Evidence from Chinese Markets. / Chiang, Thomas C.; Qiao, Zhuo; Wong, Wing Keung.
Nonlinear Financial Econometrics: Markov Switching Models, Persistence and Nonlinear Cointegration. ed. / Greg N. Gregoriou; Razvan Pascalau. 1st. ed. London: Palgrave Macmillan, 2010. p. 49-73.

Research output: Chapter in book/report/conference proceeding › Chapter › peer-review

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A Markov Regime-Switching Model of Stock Return Volatility: Evidence from Chinese Markets

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