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Volatility of main stock indexes: similarities and differences

Airlane P. Alencar, Thelma Sáfadi


How correlated are the volatilities of stock markets indices all over the world? Is it possible to
cluster the volatility indices? To examine the behavior of the volatilities of the main world stock market indices, we analyzed the daily data for SP500 (US), Shanghai Comp Index (China), FTSE100 (UK), CAC40 (France), DAX (Germany), SP/TSX (Canada), Bovespa (Brazil), Merval (Argentina), Nikkei 225 (Japan) during the period from January 4th, 2008 to April 11th, 2011. There are several possible methods to cluster the volatilities, we consider two of them. The First method consider the comparison of estimates of the parameters w in a APARCH model, which consider the baseline level of the volatility. The second method estimate the volatilities also using APARCH models and uses correlation coefficients to clusters these indices. It was possible to conclude that the crisis reached all considered stock indices in 2008. All the analyzed countries recuperated all the losses in April 2011, except China and Japan. Regarding the volatility it was possible to identify cluster of indices. A first group was composed by UK, France, Germany and US. Brazil and Canada present a similar pattern and they are in the same cluster of Argentina.


Stock market index, volatility, APARCH, cluster.

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