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January 2021 A dynamic markov regime-switching asymmetric GARCH model and its cumulative impulse response function
Gado SEMA, Mamadou Abdoulaye KONTE, Abdou Kâ DIONGUE
Afr. Stat. 16(1): 2537-2559 (January 2021). DOI: 10.16929/as/2021.2537.173


In this paper, we consider the Markov regime-switching GJR-GARCH(1,1) model to capture both the cumulative impulse response and the asymmetry of the dynamic behavior of financial market volatility in stationary and explosive states. The model can capture regime shifts in volatility between two regimes as well as the asymmetric response to negative and positive shocks. A Monte Carlo simulation is conducted to validate the main theory and find that the regime-switching GJR-GARCH model performs better than the standard GJR-GARCH model. Applications to Brazilian stock market data show that the proposed model performs well in terms of cumulative impulse response.

Dans cet article, nous examinons le modèle GJR-GARCH(1,1) à changement de régime de Markov pour capturer à la fois la réponse impulsionnelle cumulative et l’asymétrie du comportement dynamique de la volatilité des marchés financiers dans les états stationnaires et explosifs. Le modèle peut capturer les changements de régime de la volatilité entre deux régimes ainsi que la réponse asymétriqueaux chocs négatifs et positifs. Une simulation de Monte Carlo est menée pour valider la théorie principale et trouver que le modèle GJR-GARCH à changement de régime est plus performant que le modèle GJR-GARCH standard. Les applications aux données du marché boursier brésilien montrent que le modèle proposé est performant en termes de réponse impulsionnelle cumulative.


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Gado SEMA. Mamadou Abdoulaye KONTE. Abdou Kâ DIONGUE. "A dynamic markov regime-switching asymmetric GARCH model and its cumulative impulse response function." Afr. Stat. 16 (1) 2537 - 2559, January 2021.


Published: January 2021
First available in Project Euclid: 11 July 2021

Digital Object Identifier: 10.16929/as/2021.2537.173

Primary: 62M20
Secondary: 60J10

Keywords: asymmetry , cumulative impulse response , forecasting , GJR-GARCH(1,1) , Markov regime-switching

Rights: Copyright © 2021 The Statistics and Probability African Society


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Vol.16 • No. 1 • January 2021
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