Stock market returns, volatility and volatility persistence : Samer A. M. Al-Rjoub, Khaled Alzubi, Morad Autair.

Abstract EN

This paper examines the relationship between stock market returns and volatility and extends to measure the degree of persistence in volatility over the period from 1990 through 2002 for selected emerging markets.

Using GARCH in mean, Exponential GARCH and by incorporating sudden change in volatility effect in the GARCH/E-GARCH models, the relationship between stock returns and variance was tested.

Empirical evidence suggests that contemporaneous returns and volatilities for the majority of the markets are significantly and positively correlated.

The volatility proves to be persistent across countries.

To account for sudden change in variance, the Iterative Cumulative Sums of Squares (ICSS) are used to identify the points of shifts in volatility.

ICSS results are significant, come in accordance with the identified points and confirm that the events and news cause shifts in volatility of stock returns.

JEL Specification: G15, G14.

KEYWORDS: Volatility, Sudden Change.