This paper analyses the behaviour of volatility for several international
stock market indexes, namely the SP 500 (USA), the Nikkei (Japan), the PSI 20
(Portugal), the CAC 40 (France), the DAX 30 (Germany), the FTSE 100 (UK), the
IBEX 35 (Spain) and the MIB 30 (Italy), in the context of non-stationarity. Our
empirical results point to the evidence of the existence of integrated
behaviour among several of those stock market indexes of different dimensions.
It seems, therefore, that the behaviour of these markets tends to some
uniformity, which can be interpreted as the existence of a similar behaviour
facing to shocks that may affect the worldwide economy. Whether this is a cause
or a consequence of market globalization is an issue that may be stressed in
future work.Comment: 10 pages, 3 figures. Paper presented in the APFA 5 conferenc

Andreia Dionisio

Baillie

Barton

Bollerslev

Darrat

Diana A. Mendes

Engle

Johansen

Lamoureux

Meddahi

Nelson

Phylaktis

Rui Menezes

Vilasuso

English

arXiv

This paper analyses the behaviour of volatility for several international stock market indexes, namely the SP 500 (USA),
the Nikkei (Japan), the PSI 20 (Portugal), the CAC 40 (France), the DAX 30 (Germany), the FTSE 100 (UK), the IBEX 35
(Spain) and the MIB 30 (Italy), in the context of non-stationarity. Our empirical results point to the evidence of the
existence of integrated behaviour among several of those stock market indexes of different dimensions. It seems, therefore,
that the behaviour of these markets tends to some uniformity, which can be interpreted as the existence of a similar
behaviour facing to shocks that may affect the worldwide economy. Whether this is a cause or a consequence of market
globalization is an issue that may be stressed in future work

Dionísio, Andreia

Menezes, Rui

Mendes, Diana

Repositório Científico da Universidade de Évora

UNCORRECTED PROOFPhysica A ] (]]]]) ]]]–]]]On the integrated behaviour of non-stationary volatility in stockmarketsAndreia Dionisioa,, Rui Menezesb, Diana A. MendesbaCenter of Business Studies, University of Evora, CEFAGE-UE, Largo Colegiais, 2, 7000 Evora, PortugalbISCTE, Av. Forcas Armadas, 1649 025 Lisboa, PortugalAbstractThis paper analyses the behaviour of volatility for several international stock market indexes, namely the SP 500 (USA),the Nikkei (Japan), the PSI 20 (Portugal), the CAC 40 (France), the DAX 30 (Germany), the FTSE 100 (UK), the IBEX 35(Spain) and the MIB 30 (Italy), in the context of non-stationarity. Our empirical results point to the evidence of theexistence of integrated behaviour among several of those stock market indexes of different dimensions. It seems, therefore,that the behaviour of these markets tends to some uniformity, which can be interpreted as the existence of a similarbehaviour facing to shocks that may affect the worldwide economy. Whether this is a cause or a consequence of marketglobalization is an issue that may be stressed in future work.r 2007 Published by Elsevier B.V.Keywords: Cointegration; Non-stationarity; Exogeneity; Fractional integration; FIGARCH models0. IntroductionThe persistence of stock price volatility is a well-known stylized fact in the financial literature. Much of theempirical tests of volatility presented in the literature rely on the standard GARCH approach proposed byBollerslev and Wooldrigde [1], and often produce evidence that the conditional volatility is highly persistent.The stock prices volatility also presents some attributes that are typically non-stationary, an issue that requiresthe consideration of a special class of conditional heteroskedasticity models based on the IGARCHspecification proposed by Engle and Bollerslev [2]. Under this specification, there is no need to differentiate theseries when they prove to be non-stationary in order to apply the conditional heteroskedasticity models, thusretaining the richness of information contained in the original series.The main purpose of this paper is to compare the volatility between several international stock marketindexes, namely the S&P 500 (USA), the Nikkei (Japan), the Hang-Seng (Hong-Kong), the PSI 20 (Portugal),the CAC 40 (France), the DAX 30 (Germany), the FTSE 100 (UK), the IBEX 35 (Spain), the ASE (Greece)and the MIB 30 (Italy), in the context of non-stationarity. We use the daily closing prices of these indexes toperform the tests and to present the empirical results.ARTICLE IN PRESSwww.elsevier.com/locate/physa135791113151719212325272931333537394143454749518:07f=WðJul162004ÞþmodelPHYSA : 10435Prod:Type:FTPpp:128ðcol:fig::NILÞED:JyothiGPAGN:vs SCAN:0378-4371/$ - see front matter r 2007 Published by Elsevier B.V.doi:10.1016/j.physa.2007.02.008Corresponding author.E-mail address: andreia@uevora.pt (A. Dionisio).Please cite this article as: A. Dionisio, et al., On the integrated behaviour of non-stationary volatility in stock markets, Physica A(2007), doi:10.1016/j.physa.2007.02.008

On the integrated behaviour of non-stationary volatility in stock markets

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This paper analyses the behaviour of volatility for several international stock market indexes, namely the SP 500 (USA), the Nikkei (Japan), the PSI 20 (Portugal), the CAC 40 (France), the DAX 30 (Germany), the FTSE 100 (UK), the IBEX 35 (Spain) and the MIB 30 (Italy), in the context of non-stationarity. Our empirical results point to the evidence of the existence of integrated behaviour among several of those stock market indexes of different dimensions. It seems, therefore, that the behaviour of these markets tends to some uniformity, which can be interpreted as the existence of a similar behaviour facing to shocks that may affect the worldwide economy. Whether this is a cause or a consequence of market globalization is an issue that may be stressed in future work

Dionísio, A.

Menezes, R.

Mendes, D. A.

Repositório Institucional do ISCTE-IUL

Physica A Statistical Mechanics and its Applications

http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.242.4531

On the integrated behaviour of non-stationary volatility in stock
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On the integrated behaviour of non-stationary volatility in stock markets

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Repositório Institucional do ISCTE-IUL