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An Application of GARCH while investigating volatility in stock returns of the World

Author

Listed:
  • Muhammad Imtiaz Subhani
  • Syed Akif Hasan
  • Rabia Mohammad Ayub Moten
  • Amber Osman

    () (Iqra University
    Iqra University
    Iqra University
    Iqra University)

Abstract

A healthy stock market is a sign of sound and healthy economy. Stock market is a volatile market affected, at times directly and most often indirectly, by many micro and macroeconomic players. Of these players interest rates and exchange rates are among the ones undertaken in this study. The rationale behind this study is to ascertain the volatility in stock returns of various stock exchanges in relevance to interest rates and exchange rates over a range of 8 countries for assorted periods. GARCH (1, 1) was deployed for investigating the possible eventualities of volatilities of stock markets. The findings were found varying for Pakistan, India, Hong Kong, Japan, United States, United Kingdom, Spain and Germany. Moreover, almost for all countries GARCH (1, 1) yielded significant results confirming the existence of volatility of stock markets for the current period of outlined countries due to volatility of those stock markets during the previous lags. The findings may help investors know the stock markets’ trends which are also for some cases (nations) affected by interest rates and/or exchange rates and thus to invest accordingly.

Suggested Citation

  • Muhammad Imtiaz Subhani & Syed Akif Hasan & Rabia Mohammad Ayub Moten & Amber Osman, 2011. "An Application of GARCH while investigating volatility in stock returns of the World," South Asian Journal of Management Sciences (SAJMS), Iqra University, Iqra University, vol. 5(2), pages 49-59, Fall.
  • Handle: RePEc:ajm:journl:v:5:y:2011:i:2:p:49-59
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    File URL: http://sajms.iurc.edu.pk/issues/2011b/Fall2011V5N2P2.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Muhammad Mansoor Baig & Waheed Aslam & Qaiser Malik & Muhammad Bilal, 2015. "Volatility of Stock Markets (an Analysis of South Asian and G8 Countries)," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(6), pages 58-70, December.

    More about this item

    Keywords

    ARCH; GARCH; Volatility; AR-Process; Conditional Hetroskedecity;

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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