Department of Economics and Business Economics

FIEGARCH-M and and International Crises: A Cross-Country Analysis

Research output: Working paperResearch

  • Jie Zhu, Denmark
  • School of Economics and Management
We apply the fractionally integrated exponential GARCH with volatility-in-mean
(FIEGARCH-M) model of Christensen, Nielsen & Zhu (2007) to estimate the risk
premium after different crises occurred in major stock markets during the past two
decades. The model allows keeping the long memory property in volatility and a
filtered volatility-in-mean component is used as a proxy for the risk factor. The esti-
mation results show that the 1987 stock market crash and September 11, 2001 attack
have persistent effects on stock markets. A significant risk factor is found for both
crises in most crisis-hit markets, and it is nonmonotic for different markets. Either
volatility feedback or risk premium is a possible explanation for the risk factor. On
the contrary, Asian financial crisis and other market-specific crises have no persistent
impact on most markets.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages42
Publication statusPublished - 2008

    Research areas

  • FIEGARCH-M; international stock market crisis; 1987 stock market crash; dotcom bubble; Asian crisis; 9/11 attack; country-specific crisis

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