Table 4. Regime-switching modelling for changes in implied volatility
_______________________(S&P 500 index)_______________________
Model 1 |
Model 2 Model 3 |
Model 4 |
Model 5 | |
w1 |
-0.0793a |
Model Parameters -0.0788a -0.0080 |
-0.1138a |
I -0.0146 |
w 2 |
4.3311a |
4.3243a -0.1302a |
-0.0133 |
-0.1106a |
δ |
-0.0437a |
-0.0358a |
-0.0723a | |
δ2 |
-0.1076b |
-0.0769a |
-0.0479a | |
β |
0.0965a |
0.0592a -0.6216a |
-1.4887a |
-0.6243a |
β2 |
0.2078 |
0.1097 -1.5029a |
-0.6162a |
-1.5016a |
Y |
5.5455a |
8.9329a |
5.8918a | |
γ 2 |
9.21184a |
5.7441a |
9.5776a | |
φ φ2 W1 = w 2 |
912.1114a |
Hypothesis Tests 898.6265a 8.6952a |
6.1134b |
0.0184c 0.0640a 5.3364b |
δ = δ2 |
1.9562 |
6.9142a |
2.3351 | |
β = β2 |
0.6735 |
0.1177 1306.9559a |
1364.9120a |
1298.9449a |
Y1 = γ 2 |
19.6618a |
15.0836a |
18.5454a | |
φφ = φ2 P11 = P 22 |
16.6083a |
13.5024a 87.9058a |
79.8012a |
5.2107b 84.8625a |
LL |
11893.48 |
11895.73 13453.93 |
13470.09 |
13473.32 |
Notes: Significance at the 1, 5 and 10 % level is denoted by a, b and c respectively.
The estimated Markov regime-switching models are represented by
∆v = w + βr +ζ for Model 1, ∆v = w +δ∆v + βr +ζ for
t i i t-1 t t i i t-1 i t -1 t
Model 2, ∆v = w + βr +γ r2 +ζ for Model 3,
t i i t-1 i t-1 t
∆v = w +δ∆v +βr +γ r2 +ζ for Model 4, and
t i i t-1 i t -1 i t-1 t
∆ vt = wi + δi∆ vt-1 + βirt-1 + γirt-1 + φi∆σrt-1 + ζt for Model 5. The model
parameters w and σe are scaled by 102. The null hypothesis tests are
distributed asχ2(1) . LL refers to the log maximum likelihood function.
24
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