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Regime-Switching Models and Their Application in the Financial Markets
Fišerová, Tereza ; Vošvrda, Miloslav (advisor) ; Skuhrovec, Jiří (referee)
The thesis is divided into two parts. The theoretical part introduces the reader to the theory of ARCH-type models and their extensions which are represented by the Markov regime-switching models that allow for capturing of structural breaks in the data dynamics. In addition, the first part summarizes the current state of art. In the empirical part, the model of Klaassen (2002) is adopted to find evidence on the existence of two distinct volatility regimes in four of the Central European stock markets (Austria, the Czech Republic, Germany and Poland). The model is also used as a tool for economic crises identification. Analysis of the daily and weekly observations covering the period from January 3, 2000 to December 31, 2010 provides three remarkable results. First, MRS-GARCH(1,1) model is adequate for modelling stock market volatility in Central Europe. Second, the high volatility regime tends to be associated with a financial crisis. Third, the current crisis is exceptional in terms of its duration in comparison with previous works' conclusions.
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Regime-Switching Models and Their Application in the Financial Markets
Fišerová, Tereza ; Vošvrda, Miloslav (advisor) ; Skuhrovec, Jiří (referee)
The thesis is divided into two parts. The theoretical part introduces the reader to the theory of ARCH-type models and their extensions which are represented by the Markov regime-switching models that allow for capturing of structural breaks in the data dynamics. In addition, the first part summarizes the current state of art. In the empirical part, the model of Klaassen (2002) is adopted to find evidence on the existence of two distinct volatility regimes in four of the Central European stock markets (Austria, the Czech Republic, Germany and Poland). The model is also used as a tool for economic crises identification. Analysis of the daily and weekly observations covering the period from January 3, 2000 to December 31, 2010 provides three remarkable results. First, MRS-GARCH(1,1) model is adequate for modelling stock market volatility in Central Europe. Second, the high volatility regime tends to be associated with a financial crisis. Third, the current crisis is exceptional in terms of its duration in comparison with previous works' conclusions.
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