Open AccessEquity market volatility using garch models- evidence from Pakistan stock exchange (kse-100 index)
Author(s) -
Muhammad Asif,
Abdul Aziz
Publication year - 2016
Publication title -
international journal of accounting and economics studies
Language(s) - English
Resource type - Journals
ISSN - 2309-4508
DOI - 10.14419/ijaes.v4i2.6200
Subject(s) - stock exchange , autoregressive conditional heteroskedasticity , volatility (finance) , economics , econometrics , financial economics , stock market , stock market index , portfolio , finance , paleontology , horse , biology
Purpose – The purpose of this paper is to investigate the cluster volatility of return distribution in the Pakistan Stock exchange (PSX) formerly named Karachi stock exchange (KSE-100 Index). GARCH model for characterizing financial market volatility is discussed.Design/methodology/approach –This study used daily time series of the market index PSX (KSE-100) data over the period from January 1st, 2008 to December 31st, 2015, 1983 observations have been collected from KSE website.ARCH family models have been used, such as GARCH, EGARCH, PGARCH and TARCH models, to estimate cluster volatility. SIC, AIC, and Log likelihood have been used to select the appropriate model.Findings – GARCH 1,1 model is found the most appropriate model among ARCH family models. The outcome of this study indicates that the Pakistan Stock Exchange is weak-form efficient and explains cluster volatility and leptokurtic distribution.Research limitations/implications – Re-composing of Karachi stock exchange 100 index.Practical implications – Stock market returns' behavior changes according to daily basis available information, which is helpful for the investors to maximize their portfolio's return and managing the risk.Originality/value – Karachi stock market (KSE-100 Index) volatility from 2011 to 2015.