Volatility Persistence Across Market Crises : A GARCH Analysis of the S&P 500 and STOXX 600

Sammanfattning

Background: Financial market volatility is a central measure of uncertainty andsystemic risk in equity markets. Major financial crises, including the Dot-Com bubble, the Global Financial Crisis, and the COVID-19 pandemic,have historically triggered sharp and persistent increases in volatilityacross global markets. Comparative analyses examining volatilitybehaviour across multiple crises and across two of the world's mostinfluential financial regions simultaneously remain limited. Purpose: The purpose of this study is to empirically compare conditional volatilitydynamics in United States and European equity markets across threemajor financial crises, examining how persistence differs between crisisand non-crisis periods and whether these patterns vary between regions. Method: Daily log returns of the S&P 500 and STOXX Europe 600 are analysedfrom early 1997 to early 2023. GARCH(1,1) models are estimated acrosscrisis and non-crisis sub-periods, with EGARCH(1,1) as a robustnesscheck, using a consistent econometric framework. Conclusion: Volatility persistence is uniformly high across both indices and all threecrisis windows, with shocks decaying most slowly during the GlobalFinancial Crisis and most rapidly during the Dot-Com bubble. Regional differences are crisis-dependent rather than structural, Europeanpersistence exceeds United States persistence during the Dot-Comepisode, converges during the GFC, and falls below it during COVID-19.