Abstract:

(Defining the Financial Breaks on Alternative Market Volatilities through ICSS Algorithms and Effects on Persistency: Cases of Turkey and London) In this study, volatility behavior and structural breaks in unconditional variance are investigated by using Iterated Cumulative Sums of Squares Method – ICSS and Component GARCH-CGARCH on the free market gold price that includes the 17/07/2003 – 06/08/2009 periods for Turkey and England. After break dates for free market gold prices were detected via ICSS, the economic, politic, social events that thought as impressive on free market gold prices at that dates in Turkey and England were examined. Also in this study, the effect of significant break points detected by ICSS on long and short term volatility persistence was analyzed by introducing the dummy variables representing the break dates to the permanent trend component and temporary component equations of CGARCH model. In this study, it is found that because they are alternative investment tools, the free market gold prices are being effected from the changes on both foreign exchange and interest rates along with the factors that creates those change. Moreover, gold prices are unable to provide the stability of prices because of the political events. Besides, the results of CGARCH model indicate that when the breaks are taken into consideration for Turkey the short and long term persistence respectively decreased by 89% and 15% where for England it is respectively 87%and 15%. With the guidance of those results it can be said that the shocks that occurs on volatility creates price fluctuations at long and short term.

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