Please use this identifier to cite or link to this item:
Boudt, Kris
Daníelsson, Jón
Koopman, Siem Jan
Lucas, Andre
Year of Publication: 
Series/Report no.: 
Working Paper Research 227
We propose a parsimonious regime switching model to characterize the dynamics in the volatilities and correlations of US deposit banks' stock returns over 1994-2011. A first innovative feature of the model is that the within-regime dynamics in the volatilities and correlation depend on the shape of the Student t innovations. Secondly, the across-regime dynamics in the transition probabilities of both volatilities and correlations are driven by macro-financial indicators such as the Saint Louis Financial Stability index, VIX or TED spread. We find strong evidence of time-variation in the regime switching probabilities and the within-regime volatility of most banks. The within-regime dynamics of the equicorrelation seem to be constant over the period.
Document Type: 
Working Paper

Files in This Item:
2.06 MB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.