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Bayesian Testing for Asset Volatility Persistence on Multivariate Stochastic Volatility Models
Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou, China
Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou, China
Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou, China
- 1 Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou, China
- 2 Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou, China
- 3 Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou, China
Journal of Mathematical Finance·Volume 02 (2012)·Pages 83–89·Published 28 February 2012·DOI10.4236/jmf.2012.21010
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Abstract
In empirical finance, it is well-known that the volatility of asset returns is highly persistent. The persistence of the volatility process may be checked by testing for a unit root on stochastic volatility models. In this paper, a Bayesian test statistic based on decision theory is developed for testing a unit root on multivariate stochastic volatility models. At last, the developed approach is applied to investigate the persistent effect of financial crisis on the two main stock markets in China.
KeywordsAsset Volatility PersistencyBayes FactorDecision TheoryMarkov Chain Monte CarloUnit Root TestingMultivariate Stochastic Volatility Models
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