Time‐varying volatility modelling of Baltic stock markets
As time‐varying volatility has found applications in roughly all time series modelling in economics, it largely draws attention in the areas of financial markets. This study also examines the characteristics of conditional volatility in the Baltic Stock Markets (Estonia, Latvia and Lithuania) by usi...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Vilnius Gediminas Technical University
2010-09-01
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| Series: | Journal of Business Economics and Management |
| Subjects: | |
| Online Access: | https://journals.vgtu.lt/index.php/JBEM/article/view/5869 |
| _version_ | 1818887838721114112 |
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| author | Bora Aktan Renata Korsakienė Rasa Smaliukienė |
| author_facet | Bora Aktan Renata Korsakienė Rasa Smaliukienė |
| author_sort | Bora Aktan |
| collection | DOAJ |
| description | As time‐varying volatility has found applications in roughly all time series modelling in economics, it largely draws attention in the areas of financial markets. This study also examines the characteristics of conditional volatility in the Baltic Stock Markets (Estonia, Latvia and Lithuania) by using a broad range of GARCH volatility models. Correctly forecasting the volatility leads to better understanding and managing financial market risk. Daily returns from four Baltic stock indexes are used; Estonia (TALSE index), Latvia (RIGSE index), Lithuania (VILSE index) and synthetic BALTIC benchmark index. We test a large family of GARCH models, including; the basic GARCH model, GARCH‐in‐mean model, asymmetric exponential GARCH and GJR GARCH, power GARCH and component GARCH model. We find strong evidence that daily returns from Baltic Stock Markets can be successfully modelled by GARCH‐type models. For all Baltic markets, we conclude that increased risk will not necessarily lead to a rise in the returns. All of the analysed indexes exhibit complex time series characteristics involving asymmetry, long tails and complex autoregression in the returns. Results from this study are firmly recommended to financial officers and international investors.
Santrauka
Straipsnyje analizuojamas salyginis Baltijos vertybiniu popieriu rinku (Estijos, Latvijos ir Lietuvos) nepastovumas, taikant eile GARCH kintamumo modeliu. Pažymetina, kad tinkamai prognozuojant nepastovuma, galima geriau suvokti ir valdyti finansiniu rinku rizika. Straipsnyje remiamasi keturiu Baltijos šaliu kasdienemis akciju indeksu gražomis; Estijos (TALSE indeksu), Latvijos (RIGSE indeksu), Lietuvos (VILSE indeksu) ir sintetiniu palyginamuoju BALTIC indeksu. Pritaikius eile GARCH kintamumo modeliu, galima teigti, kad didejanti rizika Baltijos šaliu rinkose nebūtinai itakos vertybiniu popieriu gražos augima. Tyrimo metu gauti rezultatai rekomenduojami finansu specialistams ir investuotojams.
First Published Online: 10 Feb 2011
Reikšminiai žodžiai: Baltijos vertybiniu popieriu rinkos, salyginis nepastovumas, GARCH modeliai, finansine rizika, graža |
| first_indexed | 2024-12-19T16:43:36Z |
| format | Article |
| id | doaj.art-d47aba7f4b69453790fb121215adf953 |
| institution | Directory Open Access Journal |
| issn | 1611-1699 2029-4433 |
| language | English |
| last_indexed | 2024-12-19T16:43:36Z |
| publishDate | 2010-09-01 |
| publisher | Vilnius Gediminas Technical University |
| record_format | Article |
| series | Journal of Business Economics and Management |
| spelling | doaj.art-d47aba7f4b69453790fb121215adf9532022-12-21T20:13:43ZengVilnius Gediminas Technical UniversityJournal of Business Economics and Management1611-16992029-44332010-09-0111310.3846/jbem.2010.25Time‐varying volatility modelling of Baltic stock marketsBora Aktan0Renata Korsakienė1Rasa Smaliukienė2Yasar University, Faculty of Economics and Business, Department of Finance, Selcuk Yasar Campus, 35100 Bornova, Izmir, TurkeyVilnius Gediminas Technical University, Saulėtekio al 11, 10223 Vilnius, LithuaniaVilnius Gediminas Technical University, Saulėtekio al 11, 10223 Vilnius, LithuaniaAs time‐varying volatility has found applications in roughly all time series modelling in economics, it largely draws attention in the areas of financial markets. This study also examines the characteristics of conditional volatility in the Baltic Stock Markets (Estonia, Latvia and Lithuania) by using a broad range of GARCH volatility models. Correctly forecasting the volatility leads to better understanding and managing financial market risk. Daily returns from four Baltic stock indexes are used; Estonia (TALSE index), Latvia (RIGSE index), Lithuania (VILSE index) and synthetic BALTIC benchmark index. We test a large family of GARCH models, including; the basic GARCH model, GARCH‐in‐mean model, asymmetric exponential GARCH and GJR GARCH, power GARCH and component GARCH model. We find strong evidence that daily returns from Baltic Stock Markets can be successfully modelled by GARCH‐type models. For all Baltic markets, we conclude that increased risk will not necessarily lead to a rise in the returns. All of the analysed indexes exhibit complex time series characteristics involving asymmetry, long tails and complex autoregression in the returns. Results from this study are firmly recommended to financial officers and international investors. Santrauka Straipsnyje analizuojamas salyginis Baltijos vertybiniu popieriu rinku (Estijos, Latvijos ir Lietuvos) nepastovumas, taikant eile GARCH kintamumo modeliu. Pažymetina, kad tinkamai prognozuojant nepastovuma, galima geriau suvokti ir valdyti finansiniu rinku rizika. Straipsnyje remiamasi keturiu Baltijos šaliu kasdienemis akciju indeksu gražomis; Estijos (TALSE indeksu), Latvijos (RIGSE indeksu), Lietuvos (VILSE indeksu) ir sintetiniu palyginamuoju BALTIC indeksu. Pritaikius eile GARCH kintamumo modeliu, galima teigti, kad didejanti rizika Baltijos šaliu rinkose nebūtinai itakos vertybiniu popieriu gražos augima. Tyrimo metu gauti rezultatai rekomenduojami finansu specialistams ir investuotojams. First Published Online: 10 Feb 2011 Reikšminiai žodžiai: Baltijos vertybiniu popieriu rinkos, salyginis nepastovumas, GARCH modeliai, finansine rizika, gražahttps://journals.vgtu.lt/index.php/JBEM/article/view/5869Baltic stock marketsconditional volatilityGARCH modelsfinancial riskreturns |
| spellingShingle | Bora Aktan Renata Korsakienė Rasa Smaliukienė Time‐varying volatility modelling of Baltic stock markets Journal of Business Economics and Management Baltic stock markets conditional volatility GARCH models financial risk returns |
| title | Time‐varying volatility modelling of Baltic stock markets |
| title_full | Time‐varying volatility modelling of Baltic stock markets |
| title_fullStr | Time‐varying volatility modelling of Baltic stock markets |
| title_full_unstemmed | Time‐varying volatility modelling of Baltic stock markets |
| title_short | Time‐varying volatility modelling of Baltic stock markets |
| title_sort | time varying volatility modelling of baltic stock markets |
| topic | Baltic stock markets conditional volatility GARCH models financial risk returns |
| url | https://journals.vgtu.lt/index.php/JBEM/article/view/5869 |
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