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Comparison of Volatility Models of PX Index and FTSE 100 Index

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  • Adam Borovička

Abstract

The article deals with a typical phenomenon of financial time series - volatility. These time series usually embody intermittent periods of relative "calm" and quite high variability. A volatility modelling of time series is made with the help of special econometric volatility models which characterize the so-called conditional heteroskedasticity. The goal of this paper is to choose a suitable volatility model for Prague PX Index and London FTSE 100. The path to the aim is via a stationarity analysis of tracked time series of closing values of the mentioned indexes, conditional heteroskedasticity and autocorrelation tests and an identification of probability distribution of the studied quantity. A profiling of asymmetric effects is also very important because they determine the linear or nonlinear character of the resulting model.

Suggested Citation

  • Adam Borovička, 2011. "Comparison of Volatility Models of PX Index and FTSE 100 Index," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2011(2), pages 66-88.
  • Handle: RePEc:prg:jnlaop:v:2011:y:2011:i:2:id:331:p:66-88
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    More about this item

    Keywords

    volatility; conditional heteroskedasticity; EGARCH; GJR-GARCH; function NIC;

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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