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Volatility Behaviour in Emerging Stock Markets - A GARCH Approach

International Journal of Business Analytics and Intelligence

Volume 4 Issue 2

Published: 2016
Author(s) Name: Pradipta Kumar Sanyal, Padma Gahan | Author(s) Affiliation: Asst Prof, Finance, Birla Institute of Management Technology (BIMTECH), Bhubaneswar, Odisha, India
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Abstract

This study primarily focuses on three aspects - (i) volatility in the emerging stock markets across globe by application of GARCH family models, (ii) study of ARMA structures, and (iii) a comparison of symmetric and asymmetric volatility. In the last decade or so, investors from developed countries are mostly focusing on the emerging economics as their investment opportunities. They associate a good amount of risk premium with these countries as far as the risk and return are concerned with their investments. Investments drawn from developed nations seems to make stock markets of emerging nations more volatile as these investment are exposed to both irrational and rational factors. Hence its imperative to understand the volatility behavior of emerging stock markets over a period of time and also to study the comparative analysis of the volatility behaviors across these markets. This draws us to revisit the topic on volatility behavior considering the emerging markets for this study. In this paper an attempt is being made to estimate the volatility behavior of stock markets of 10 emerging economics and hence concentrated on India, China, Indonesia, Sri Lanka, Pakistan, Russia, Brazil, South Korea, Mexico, and Hong Kong.

Keywords: Stock Market Volatility, GARCH, Emerging Markets, Heteroscedasticity, ARMA

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