TITLE:
Which Model Performs Better While Forecasting Stock Market Volatility? Answer for Dhaka Stock Exchange (DSE)
AUTHORS:
S. M. Abdullah, Mohammod Akbar Kabir, Kawsar Jahan, Salina Siddiqua
KEYWORDS:
Stock Market, Volatility Forecasting, GARCH, EGARCH, Mean Equation
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.14,
October
26,
2018
ABSTRACT: An efficient and well behaved capital market can be
regarded as a prerequisite for the sustainable financial development for an
economy. For making the stock market efficient and reducing uncertainty,
volatility measure is necessary for the policy makers. The main objective of
this paper is to examine relative ability of various models to forecast future
volatility and to devise appropriate volatility model for capturing variability
in stock returns of Dhaka Stock Exchange (DSE). By exploiting daily data
spanning from 27th November, 2001 to 31st July, 2013, it
was found that, from volatility persistency perspective MA(2)-GARCH(2, 1) is
better due to both in sample and out of sample accuracy. In contrast, from
capturing asymmetric effect perspective MA(2)-EGARCH(1, 3) is better. Thus,
there was no clear winner and hence the decision should depend on the purpose
of the concerned people.