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One data, one break?


Karoglou, Michail and Demetriades, Panicos and Law, Siong Hook (2011) One data, one break? Empirical Economics, 41 (1). pp. 7-24. ISSN 0377-7332; ESSN: 1435-8921


This paper demonstrates that the conventional approach of using official liberalisation dates as the only existing breakdates could lead to inaccurate conclusions as to the effect of the underlying liberalisation policies. It also proposes an alternative paradigm for obtaining more robust estimates of volatility changes around official liberalisation dates and/or other important market events. By focusing on five East Asian emerging markets, all of which liberalised their financial markets in the late, and by using recent advances in the econometrics of structural change, it shows that (i) the detected breakdates in the volatility of stock market returns can be dramatically different to official liberalisation dates and (ii) the use of official liberalisation dates as breakdates can readily entail inaccurate inference. In contrast, the use of data-driven techniques for the detection of multiple structural changes leads to a richer and inevitably more accurate pattern of volatility evolution emerges in comparison with focussing on official liberalisation dates.

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Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
DOI Number: https://doi.org/10.1007/s00181-010-0436-x
Publisher: Springer Verlag
Keywords: Financial liberalization; Volatility; Structural changes; Breaks
Depositing User: Azana Abd Hadi
Date Deposited: 11 Dec 2014 05:10
Last Modified: 27 Sep 2015 23:27
Altmetrics: http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.1007/s00181-010-0436-x
URI: http://psasir.upm.edu.my/id/eprint/22621
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