This article focuses on the asset price volatility at the stock exchange that result from the regime switching behaviour in the market. This study is devoted to the question about how the asset price volatility affects the US sovereign debt market. The efficient market hypothesis has been a base for the asset pricing. This hypothesis is discussed in this study. The review of the literature reveals nuances of behavioural finance theory, and allows us to better understand the regime switching behaviour in the market. The object of empirical study is the US sovereign debt market. We use the Markov Regime-Switching ARCH (SWARCH) model to analyse data. The results show that there is high volatility regime in both the 2012 and 2017 bonds US market, which significantly affects bond prices.
The devastating Japan earthquake (magnitude 9.0) and tsunami (39-metre high) of 2011, also called the Great Tohoku or Sendai earthquake, was a record-breaker natural disaster causing enormous damage and a nuclear meltdown at Fukushima nuclear power plant. This paper attempts to analyse the long and short run effects of this record-breaking natural disaster on the Japanese equity, debt and FX markets as well as Gold as one of the most popular metals and investment options, using daily data. A variance bound test proposed by Fakhry & Richter (2018) underpinned by the C-GARCH-t model of volatility is adopted. The results seem to indicate that the natural disaster influenced the efficiency of the market in the immediate terms more than the long term. In a global financial market where the key is competitiveness, it is essential to analyse the efficiency and therefore stability of the Japanese financial market. Therefore, analysing the impact of the natural disaster on the competitiveness of the Japanese financial market.
Following the landmark ruling by the German Federal Constitutional Court in Karlsruhe on 7th February 2014 in which they endorsed the efficient market hypothesis, we present evidence on the efficiency of the German financial market. Introducing a new variance bound test based on the Component-GARCH model of volatility to analyse the long- and short-runs effects on the efficiency of the German financial market, we test the price volatility of three markets: DAX stock index, German sovereign debt index as provided by Barclays and Bloomberg, Euro gold index by the World Gold Council and Euro currency index by the Bank of England. The results seem to be indicating a relatively strong acceptance of the efficient market hypothesis in both the short and long runs in all the observed financial markets.
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