Fractionally integrated time-varying volatility under structural break

Evidence from Kuala Lumpur composite index

Chin Wen Cheong, Zaidi Isa, Abu Hassan Shaari Md Nor

Research output: Contribution to journalArticle

Abstract

This article study the influences of structural break to the fractionally integrated time-varying volatility model in Malaysian stock markets from year 1996 to 2006. A fractionally integrated autoregressive conditional heteroscedastic (FIGARCH) model combines with sudden changes of volatility is develops to study the possibility of structural change in Asian financial crisis and currency crisis. Our empirical results evidence substantially reduction in long memory clustering volatility after the inclusion of sudden changes in the volatility. Finally, the estimation, diagnostic and model selection evaluations indicate that the fractionally integrated model with structural change is out-performed compared to the standard model.

Original languageEnglish
Pages (from-to)405-411
Number of pages7
JournalSains Malaysiana
Volume37
Issue number4
Publication statusPublished - Dec 2008

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Structural breaks
Structural change
Composite index
Time-varying volatility
Integrated
Currency crises
Volatility models
Volatility clustering
Diagnostics
Inclusion
Model selection
Empirical results
Stock market
Conditional model
Integrated model
Evaluation
Long memory
Asian financial crisis

Keywords

  • Financial time series
  • Statistical methodology

ASJC Scopus subject areas

  • General

Cite this

Fractionally integrated time-varying volatility under structural break : Evidence from Kuala Lumpur composite index. / Cheong, Chin Wen; Isa, Zaidi; Md Nor, Abu Hassan Shaari.

In: Sains Malaysiana, Vol. 37, No. 4, 12.2008, p. 405-411.

Research output: Contribution to journalArticle

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