Journal of Statistical and Econometric Methods

Volatility of the European Stock Market Indices During the Global Financial Crisis - A New Proposal of Stochastic Volatility

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• Abstract 

  This paper estimates the volatility of most important European stock market indices during the global financial crisis started in 2008, such as DAX, CAC40, FTSE100, among others. The estimation of volatility is made from a new family of stochastic volatility models proposed by Santos, Franco, Gamerman [33, 17] and extended to distributions of heavy tails by Pinho, Franco, Silva [32]. This new family of models denoted by non-Gaussian State Space Models (NGSSM) is a subclass of state space models where it is possible to compute the exact likelihood. It is also estimated volatility of the series by APARCH model and the results showed that NGSSM has a significantly better performance.