Essays on financial volatility
Item
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Title
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Essays on financial volatility
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Identifier
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d_2009_2013:de17085db84a:10064
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identifier
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10070
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Creator
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Tokat, Hakki Arda,
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Contributor
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Thom B. Thurston
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Date
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2009
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Language
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English
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Publisher
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City University of New York.
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Subject
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Finance | Economic theory | CDS markets | ISE | iterated cumulative sums of squares (ICSS) | MV GARCH | volatility persistence | volatility transmission
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Abstract
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Explaining the variation in asset prices is a fundamental problem of financial economics. As the financial volatility represents uncertainty and is taken as the risk component in financial analyses, its explanation is crucial for financial decision making. In this context, modeling the dynamics of volatility observed in financial asset returns has become the fundamental issue of finance literature.;The first part of the thesis elaborates the issue of high volatility persistence in stock returns. From the previous literature, it is well known that ignoring regime changes in standard GARCH models results in overestimation of volatility persistence. In this study, volatility pattern in Istanbul Stock Exchange is re-examined by considering the potential regime changes in volatility. By applying the iterated cumulative sums of squares (ICSS) algorithm on weekly data of ISE30 and ISE100 indices, regime change points in variance are endogenously detected. This information is integrated to a GARCH(1,1) model and it is found that the volatility persistence is not as high as it has been previously shown in the literature. The results have important implications for financial investors and question the common perception that the volatility in financial markets is highly persistent.;The last part of thesis deals with the issue of volatility spillover and examines the volatility transmission mechanism among the developed and emerging CDS markets by employing multivariate GARCH modeling. As the globalization resulted with more integration of financial markets, it is important for market participants to know how the shocks and volatility are transmitted over time across the markets. Significant transmission of shocks and volatility is found among different CDS markets. Contrary to previous studies showing one-way transmission of volatility from developed to emerging markets, interdependence detected among the different markets indicates the presence of cross-market hedging.
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Type
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dissertation
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Source
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2009_2013.csv
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degree
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Ph.D.
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Program
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Economics
