The Application of GARCH Methods in Modeling Volatility Using Sector Indices from the Egyptian Exchange
This paper examines sector specific volatility in order to determine how different sectors respond to volatility shocks within the same equity market. The Egyptian Exchange sector indices are used where firms are disaggregated and classified into twelve different sectors. Volatility is modeled using GARCH, EGARCH and TGARCH in order to examine the temporal volatility dynamics of each specific industry. Stylized facts such as volatility clustering, long memory and the leverage effect are investigated for each sector. Furthermore, the data is divided into two periods. The first period includes sector returns prior to the Egyptian revolution of January 25th 2011. This period was characterized by tranquil volatility. The second period includes the period of the revolution extending one and a half years after the revolution till June 30th 2012. This period was characterized by turbulent volatility. The findings indicate that TGARCH is the preferred model providing successful model specification for all sector indices during both periods. Although the stylized facts where apparent for most sectors for both periods, there was strong evidence of heterogeneous response of sector volatility due to the exogenous shocks of the revolution.
|Date of creation:||01 Dec 2012|
|Publication status:||Published in Journal of Money, Investment and Banking 27 (2013): pp. 68-85|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rui Castro & Gian Luca Clementi & Yoonsoo Lee, 2015.
"Cross Sectoral Variation in the Volatility of Plant Level Idiosyncratic Shocks,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 63(1), pages 1-29, March.
- Rui Castro & Gian Luca Clementi & Yoonsoo Lee, 2011. "Cross-Sectoral Variation in The Volatility of Plant-Level Idiosyncratic Shocks," NBER Working Papers 17659, National Bureau of Economic Research, Inc.
- Rui CASTRO & Gian Luca CLEMENTI & Yoonsoo LEE, 2014. "Cross–Sectoral Variation in The Volatility of Plant–Level Idiosyncratic Shocks," Cahiers de recherche 15r-2010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- CASTRO, Rui & CLEMENTI, Gian Luca & LEE, Yoonsoo, 2014. "Cross-sectoral variation in the volatility of plant-level idiosyncratic shocks," Cahiers de recherche 2014-09, Universite de Montreal, Departement de sciences economiques.
- Dimson, Elroy & Marsh, Paul, 1990. "Volatility forecasting without data-snooping," Journal of Banking & Finance, Elsevier, vol. 14(2-3), pages 399-421, August.
- Ezzat, Hassan, 2012. "The Application of GARCH and EGARCH in Modeling the Volatility of Daily Stock Returns During Massive Shocks: The Empirical Case of Egypt," MPRA Paper 50530, University Library of Munich, Germany.
- Matteo Luciani & David Veredas, 2012. "A model for vast panels of volatilities," Working Papers 1230, Banco de España;Working Papers Homepage.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:51584. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.