Switching Regime in Investors’ Risk Perception
Journal of Finance and Accounting
Volume 2, Issue 3, May 2014, Pages: 48-52
Received: Apr. 13, 2014; Accepted: Apr. 25, 2014; Published: Apr. 30, 2014
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Houda Litimi, BESTMOD – ISG, Bouchoucha Bardo, Tunis 2000, Tunisia
Ahmed BenSaïda, LaREMFiQ – IHEC, Route de la ceinture B.P. 40, Sahloul 3, Sousse 4054, Tunisia
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Financial assets’ risk is considered as heteroskedastic, and is generally modelled with GARCH models. However, this risk is perceived in the same manner, only external events change, such as returns and historical risk. The way these events are treated by investors, is assumed static. Some scholars explain that risk perception is subject to structural breaks, which are not taken under consideration in GARCH models. For this reason, this paper aims to develop the switching regime GARCH model SWGARCH. Results clearly show that the SWGARCH can capture the risk dynamics of the studied indexes better than classical models.
Switching Regime, GARCH, Risk Perception, Index
To cite this article
Houda Litimi, Ahmed BenSaïda, Switching Regime in Investors’ Risk Perception, Journal of Finance and Accounting. Vol. 2, No. 3, 2014, pp. 48-52. doi: 10.11648/j.jfa.20140203.13
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