Author(s)

Yong Li, Fang-Ping Peng, Hao-Feng Xu

Sun Yat-sen Business School, Sun Yat-sen University, Guangzhou, China.

In empirical finance, it is well-known that the volatility of asset returns is highly persistent. The persistence of the volatility process may be checked by testing for a unit root on stochastic volatility models. In this paper, a Bayesian test statistic based on decision theory is developed for testing a unit root on multivariate stochastic volatility models. At last, the developed approach is applied to investigate the persistent effect of financial crisis on the two main stock markets in China.

Asset Volatility Persistency; Bayes Factor; Decision Theory; Markov Chain Monte Carlo; Unit Root Testing; Multivariate Stochastic Volatility Models

Y. Li, F. Peng and H. Xu, "Bayesian Testing for Asset Volatility Persistence on Multivariate Stochastic Volatility Models," Journal of Mathematical Finance, Vol. 2 No. 1, 2012, pp. 83-89. doi: 10.4236/jmf.2012.21010.