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APPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY Appl. Stochastic Models Bus. Ind., 2006; 22:573586
 

Summary: APPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY
Appl. Stochastic Models Bus. Ind., 2006; 22:573586
Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/asmb.653
Interaction between stock indices via changepoint analysis
Martin J. Lenardon and Anna Amirdjanova*,y
Department of Statistics, University of Michigan, Ann Arbor, MI 48109, U.S.A.
SUMMARY
Stock market indices from several countries are modelled as discretely sampled diffusions whose
parameters change at certain times. To estimate these times of parameter changes we employ both a
sequential likelihood-ratio test and a non-parametric, spectral algorithm designed specifically for time
series with multiple changepoints. Finally, we use point-process techniques to model relationships between
changepoints of different financial time series. Copyright # 2006 John Wiley & Sons, Ltd.
Received 30 June 2005; Revised 3 April 2006; Accepted 15 July 2006
KEY WORDS: changepoint analysis; financial time series models; likelihood and non-parametric
estimation; diffusion
1. INTRODUCTION
The world-wide stock market crash in October of 1987 caused a surge of interest in the
interaction between national stock markets. Since then, technological advances such as the
spread of the Internet have made notions of a `global marketplace' ubiquitous; however, there is
much uncertainty as to how exactly marketplaces are global. In [1] it is suggested that stock

  

Source: Amirdjanova, Anna - Department of Statistics, University of Michigan

 

Collections: Mathematics