Modeling Stock Market Volatility Using GARCH Models: A Case Study of Nairobi Securities Exchange (NSE)
Year: 2017
Type: article
Abstract: The aim of this paper is to use the General Autoregressive Conditional Heteroscedastic (GARCH) type models for the estimation of volatility of the daily returns of the Kenyan stock market: that is Nairobi Securities Exchange (NSE). The conditional variance is estimated using the data from March 2013 to February 2016. We use both symmetric and asymmetric models to capture the most common features of the stock markets like leverage effect and volatility clustering. The results show that the volatility process is highly persistent, thus, giving evidence of the existence of risk premium for the NSE index return series. This in turn supports the positive correlation hypothesis: that is between volatility and expected stock returns. Another fact revealed by the results is that the asymmetric GARCH models provide better fit for NSE than the symmetric models. This proves the presence of leverage effect in the NSE return series.
Source: Open Journal of Statistics
Institution: University of Karachi
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: diamond
Funder: University of Karachi
OpenAlex ID: W2610356002