Stock Returns Volatility in an Emerging Market: The Pakistani Evidence
This paper examines stock returns volatility in the Pakistani equity market. Using daily stock prices of 36 companies, 8 sector indices, and the general market index, the AutoRegressive Conditional Heteroscedasticity (ARCH) class of models was applied. The analyses suggest that one of the factors causing high serial dependence in stock returns in the Pakistani equity market is the presence of conditional heteroscedasticity or volatility in stock returns and that even after controlling for volatility the returns in the market are, in general, predictable. The results show GARCH(1,1) to be an appropriate representation of conditional variance implying that current volatility in the market is significantly affected by the past volatilities. There is also strong evidence of persistence in variance in returns implying that shocks to volatility continue for a long period. However, after accounting for the structural shift due to opening of the market, the persistence was found to decline significantly.
|Date of creation:||1999|
|Date of revision:|
|Publication status:||Published in Pakistan Journal of Applied Economics 1.15(1999): pp. 19-40|
|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.:
- Akgiray, Vedat, 1989. "Conditional Heteroscedasticity in Time Series of Stock Returns: Evidence and Forecasts," The Journal of Business, University of Chicago Press, vol. 62(1), pages 55-80, January.
- repec:pid:journl:v:34:y:1995:i:1:p:25-41 is not listed on IDEAS
- Baillie, Richard T. & DeGennaro, Ramon P., 1990.
"Stock Returns and Volatility,"
Journal of Financial and Quantitative Analysis,
Cambridge University Press, vol. 25(02), pages 203-214, June.
- Poon, Ser-Huang & Taylor, Stephen J., 1992. "Stock returns and volatility: An empirical study of the UK stock market," Journal of Banking & Finance, Elsevier, vol. 16(1), pages 37-59, February.
- de Jong, Frank & Kemna, Angelien & Kloek, Teun, 1992. "A contribution to event study methodology with an application to the Dutch stock market," Journal of Banking & Finance, Elsevier, vol. 16(1), pages 11-36, February.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Husain, Fazal & Forbes, Kevin, 1999. "Efficiency in a Thinly Traded Market: The Case of Pakistan," MPRA Paper 5355, University Library of Munich, Germany.
- Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
- French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, vol. 19(1), pages 3-29, September.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:5270. 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.