ARE VOLATILITY EXPECTATIONS CHARACTERIZED BY REGIME SHIFTS? EVIDENCE FROM IMPLIED VOLATILITY INDICES

Table 3. Regime-switching modelling of implied volatility
_______________________(Nikkei 225 index)______________________

Model 1

Model 2

Model 3

Model 4

Model parameters

I

w1

0.3106^a

0.1522^a

0.3030^a

0.0048^a

w 2

0.2080^a

0.0088^a

0.2057^a

0.3494^a

δι

0.7995^a

0.9747^a

δ2

0.9611^a

-0.0693^a

βι

-0.0339

0.5529^a

-0.1489^a

-0.3231^a

β2

0.0044

0.0072

-0.0991

0.8789^a

Y1

20.5833^a

5.7630^a

γ 2

11.6824^a

-24.6102^a

Ψ1

Ψ2

Hypothesis tests

I

w₁ = w ₂

4590.3206^a

1764.6474^a

3844.3931^a

10957.0160^a

δι = δ2

225.7556^a

9901.6532^a

βι = β2

0.1639

85.26211^a

0.3771

430.3168^a

Yi = γ 2

28.2025^a

432.8464^a

Φ1 = Ψ2

4.5052^b

5.4429^b

P11 = P 22

20.8045^a

175.5199^a

LL

6822.32

11007.45

6883.55

11386.28

Notes: Significance at the 1, 5 and 10 % level is denoted by ^a, ^b and