EXPLORING STRUCTURAL BREAKS IN INTERNATIONAL STOCK MARKETS AND ITS IMPLICATIONS
EXPLORING STRUCTURAL BREAKS IN INTERNATIONAL STOCK MARKETS AND ITS IMPLICATIONS

Summary/Abstract: Structural breaks are important stylized facts that should be included in the analysis of security market returns. Predictions on stock markets are susceptible to variations in economic events which may not materialise with the passage of time. Accordingly, improving the accuracy of stock market forecasts should embed to a larger extent unobserved heterogeneity which explains structural breaks. Therefore, the aim of this study was to explore structural breaks in asset returns which makes forecasting very difficult. Using the chow and CUSUM square test and a sample period from January 02, 2018, to January 2, 2023, the findings revealed that structural breaks varies across financial markets. More specifically, the Nasdaq and Nikkei 225 displayed significant breaks. However, no significant breaks were observed in the JSE, CA,C, and DAX. In the BIST, the breaks were insignificant at 5% but significant at 10% confidence level. The implication of this study is that there is a high probability that forecasting the performance of the Nasdaq and Nikkei 225 will not realise and we expect to see volatility persistence in these markets.

• Details
• Contents