Title

Selection of a model for exploring cross market linkages: A review of E-GARCH, markov-switching framework and structural break models

Document Type

Conference Proceeding

Publication Title

ECU Business Doctoral and Emerging Scholars Colloquium 2016

Publisher

Edith Cowan University

School

School of Business and Law

RAS ID

23290

Comments

Do, A., Powell, R., Singh, A., & Yong, J. (2016, December). Selection of a Model for Exploring Cross Market Linkages: A Review of E-GARCH, Markov-switching Framework and Structural Break Models. In ECU Business Doctoral and Emerging Scholars Colloquium 2016(p. 1).

Link to Colloquium program Available here

Abstract

This article undertakes a literature review on the E-GARCH model, the Markov-switching framework and two structural break tests. Each model addresses different criteria and has different limitations, however, they complement each other nicely. The E-GARCH model deals with serial correlations and heteroskedasticity but implies spuriously high persistence in volatility if structural breaks are not accounted for. The Markov-switching framework can model specific regime cross-market behaviours and address the persistency in volatility effectively when combining with a GARCH model. Unknown structural breaks and impacts of a specific event can be tested using LSTR and SF models.

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