Preliminary communication

VOLATILITY DYNAMICS IN AN EMERGING ECONOMY: CASE OF KARACHI STOCK EXCHANGE

Mahreen Mahmud
Nawazish Mirza

Abstract

The paper aims to model and forecast the volatility in the stocks traded at the Karachi Stock Exchange before and during the recent financial crisis using the GARCH, EGARCH and GJR-GARCH models. We find the stock return volatility to be characterized by clustering and displaying asymmetries. Results point to the capability of the EGARCH(1,1) model at forecasting for both periods lending support to the use of GARCH family of models for emerging markets during crisis. We find evidence for a synthetically constructed index based on trading volume capturing the volatility structure of the market as well as that based on market capitalization which has important implications for investors.

Keywords

Karachi Stock Exchange; Trading Volume; Forecasting; Volatility Clustering

Hrčak ID:

77598

URI

https://hrcak.srce.hr/77598

Publication date:

1.12.2011.

Article data in other languages: croatian

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