Jump Dynamics And Volatility Components For OECD Stock Returns

The paper applies Markov Regime Switching Model (MRSM) to investigate the volatility behaviour of twelve OECD stock markets (U.S.A, France, Ireland, Netherlands, Spain, Denmark, Norway, Sweden, Switzerland, UK, Australia and Japan) for the period 2004-2010. The results highlight two different regimes: the first regime consist of low mean high volatility whereas the second regime is categorized by high mean low volatility. We conclude that the periods of high volatility are generally synchronous to several economic and/or political events in all the developed markets during the period under investigation