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| Author: | Gil-Alana, L.A. Cunado, J. Gracia, F.P. de |
| Title: | Stochastic volatility in the Spanish stock market: A long memory model with a structural break |
| Journal: | European Journal of Finance
2008 : JAN/FEB, VOL. 14:1-2, p. 23-31 |
| Index terms: | stock markets models Spain |
| Freeterms: | stochastic volatility returns |
| Language: | eng |
| Abstract: | This paper examines the stochastic volatility (henceforth as: stc-vol.) behaviour in the Spanish stock market returns from Jan. 2001 to May 2006. A long memory model taking into account the existence of an endogenous structural break is utilized. Without any breaks, it is shown that the orders of integration of the absolute and squared return values are higher than zero but smaller than 0.5 which implies that the stc-vol. is stationary but long memory. With a break considered, long memory is also found in the two sub-samples, with higher orders of integration before the break taking place at around 2003 for the IBEX, and at 2004 for the less liquid assets IGBM. |
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