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Using Garch-in-Mean Model to Investigate Volatility and Persistence at Different Frequencies for Bucharest Stock Exchange during 1997-2012

Author

Listed:
  • Iulian PANAIT

    (Bucharest Academy of Economic Studies)

  • Ecaterina Oana SLĂVESCU

    (Bucharest Academy of Economic Studies)

Abstract

In our paper we use data mining to compare the volatility structure of high (daily) and low (weekly, monthly) frequencies for seven Romanian companies traded on Bucharest Stock Exchange and three market indices, during 1997-2012. For each of the 10 time series and three frequencies we fit a GARCH-in-mean model and we find that persistency is more present in the daily returns as compared with the weekly and monthly series. On the other hand, the GARCH-in-mean failed to confirm (on our data) the theoretical hypothesis that an increase in volatility leads to a rise in future returns, mainly because the variance coefficient from the mean equation of the model was not statistically significant for most of the time series analyzed and on most of the frequencies. The diagnosis that we ran in order the verify the goodness of fit for the model showed that GARCH-in-mean was well fitted on the weekly and monthly time series but behaved less well on the daily time series.

Suggested Citation

  • Iulian PANAIT & Ecaterina Oana SLĂVESCU, 2012. "Using Garch-in-Mean Model to Investigate Volatility and Persistence at Different Frequencies for Bucharest Stock Exchange during 1997-2012," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(5(570)), pages 55-76, May.
  • Handle: RePEc:agr:journl:v:5(570):y:2012:i:5(570):p:55-76
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    Citations

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    Cited by:

    1. Md. Zahangir Alam & Md. Noman Siddikee & Md. Masukujjaman, 2013. "Forecasting Volatility of Stock Indices with ARCH Model," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 4(2), pages 126-143, April.
    2. repec:agr:journl:v:xxiv:y:2017:i:2(611):p:45-60 is not listed on IDEAS
    3. Yavas, Burhan F. & Dedi, Lidija, 2016. "An investigation of return and volatility linkages among equity markets: A study of selected European and emerging countries," Research in International Business and Finance, Elsevier, vol. 37(C), pages 583-596.

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