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From Discrete to Continuous: Modeling Volatility of the Istanbul Stock Exchange Market with GARCH and COGARCH

Author

Listed:
  • Yildirim, Yavuz
  • Unal, Gazanfer

Abstract

The objective of this paper is to model the volatility of Istanbul Stock Exchange market, ISE100 Index by ARMA and GARCH models and then take a step further into the analysis from discrete modeling to continuous modeling. Through applying unit root and stationary tests on the log return of the index, we found that log return of ISE100 data is stationary. Best candidate model chosen was found to be AR(1)~GARCH(1,1) by AIC and BIC criteria. Then using the parameters from the discrete model, COGARCH(1,1) was applied as a continuous model.

Suggested Citation

  • Yildirim, Yavuz & Unal, Gazanfer, 2010. "From Discrete to Continuous: Modeling Volatility of the Istanbul Stock Exchange Market with GARCH and COGARCH," MPRA Paper 27946, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:27946
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    References listed on IDEAS

    as
    1. Duan, Jin-Chuan, 1997. "Augmented GARCH (p,q) process and its diffusion limit," Journal of Econometrics, Elsevier, vol. 79(1), pages 97-127, July.
    2. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    3. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    4. Ross A. Maller & Gernot Muller & Alex Szimayer, 2008. "GARCH modelling in continuous time for irregularly spaced time series data," Papers 0805.2096, arXiv.org.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    ISE100; IMKB100; GARCH Modeling; COGARCH Modeling; discrete modeling; continuous modeling;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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