Structural Breakpoints in Volatility in International Markets

17

any volatility shifts over 1997-2002, whereas wavelet analysis found evidence of volatility
breakpoints at some given scales of the data only for 1997-1998 (Asian crisis). For interest
rates, both methods detect breakpoints in volatility for the filtered first difference of the 30-
day and 60-day series over February 2001-April 2002 (nominalization of the monetary
policy interest rate). A Wald test for parameter stability reinforces this evidence for interest
rates.

References

Aggarwal, R., C. Inclan, and R. Leal (1999), “Volatility in Emerging Stock Markets,”
Journal of Financial and Quantitative Analysis 34(1), 33-55.

Bacmann, J. and M. Dubois (2002), "Volatility in Emerging Stock Markets Revisited."
Manuscript presented at the European Financial Management Association (EFMA) 2002
London Meeting. http://ssrn.com/abstract=313932

Bruce A. and H. Gao (1996), Applied Wavelet Analysis with S-Plus. Springer-Verlag.

Gençay R., B. Whitcher, and F. Selçuk (2003). Systematic Risk and Time Scales.
Quantitative Finance 3, 108-116.

Inclan, C. and G. Tiao (1994), “Use of cumulative sums of squares for retrospective
detection of changes in variance,” Journal of the American Statistical Association 89, 913-
923.

Morandé, F. (2002), “Nominalizacion de la Tasa de Politica Monetaria: Debate y
Consequencias,” Cuadernos de Economia, The Latin American Journal No. 117, 239-252.

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