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Volatility Dynamics in an Emerging Economy: Case of Karachi Stock Exchange

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  • Mahreen Mahmud
  • Nawazish Mirza

Abstract

The paper aims to model and forecast the volatility in the stocks traded at the Karachi Stock Exchange before and during the recent financial crisis using the GARCH, EGARCH and GJR-GARCH models. We find the stock return volatility to be characterized by clustering and displaying asymmetries. Results point to the capability of the EGARCH(1,1) model at forecasting for both periods lending support to the use of GARCH family of models for emerging markets during crisis. We find evidence for a synthetically constructed index based on trading volume capturing the volatility structure of the market as well as that based on market capitalization which has important implications for investors.

Suggested Citation

  • Mahreen Mahmud & Nawazish Mirza, 2011. "Volatility Dynamics in an Emerging Economy: Case of Karachi Stock Exchange," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 24(4), pages 51-64, January.
    • Handle: RePEc:taf:reroxx:v:24:y:2011:i:4:p:51-64
    DOI: 10.1080/1331677X.2011.11517480
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    Cited by:

    1. Umar, Muhammad & Mirza, Nawazish & Rizvi, Syed Kumail Abbas & Furqan, Mehreen, 2023. "Asymmetric volatility structure of equity returns: Evidence from an emerging market," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 330-336.
    2. Chen, Zhonglu & Umar, Muhammad & Su, Chi-Wei & Mirza, Nawazish, 2023. "Renewable energy, credit portfolios and intermediation spread: Evidence from the banking sector in BRICS," Renewable Energy, Elsevier, vol. 208(C), pages 561-566.

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