01844cas a2200241 a 4500 AALejournalIMF002483 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451854848 1018-5941 BD-DhAAL BD-DhAAL Krichene, Noureddine. Modeling Stochastic Volatility with Application to Stock Returns / Noureddine Krichene. Washington, D.C. : International Monetary Fund, 2003. 1 online resource (27 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students A stochastic volatility model where volatility was driven solely by a latent variable called news was estimated for three stock indices. A Markov chain Monte Carlo algorithm was used for estimating Bayesian parameters and filtering volatilities. Volatility persistence being close to one was consistent with both volatility clustering and mean reversion. Filtering showed highly volatile markets, reflecting frequent pertinent news. Diagnostics showed no model failure, although specification improvements were always possible. The model corroborated stylized findings in volatility modeling and has potential value for market participants in asset pricing and risk management, as well as for policymakers in the design of macroeconomic policies conducive to less volatile financial markets. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2003/125 Full text available on IMF http://elibrary.imf.org/view/journals/001/2003/125/001.2003.issue-125-en.xml IMF e-Library