Modelling of Daily Price Volatility of South Africa Property Stock Market Using GARCH Analysis

Tosin B. Fateye, Oluwaseun D. Ajay and Cyril A. Ajay

AfRES from African Real Estate Society (AfRES)

Abstract: Purpose: The study examined the volatility of the daily market price of listed property stocks on the Johannesburg Stock Exchange (JSE) for a 10year period (2008-2017). The primary aim of the study is to investigate the volatility pattern of the daily market price; in an attempt to document and model the nature of volatility characterised by the daily price of the listed property stock market for informed investment decision making.Design/Methodology/Approach: The study used daily prices from January 2, 2008, to December 29, 2017 of twelve (12) quoted property companies out of the twenty-seven (27) listed on Johannesburg Stock Exchange (SA REIT Association, 2020). The property stocks were selected based on the quoted property companies that have sufficient published data on daily prices for the period under review. The data were obtained from the JSE published statistical bulletin. The study computed the average daily price of the selected (12) property stocks and was used as a proxy for the daily market price for the property stock market in the analysis. The study deployed mean, standard deviation, maximum and minimum analytical tools for descriptive statistics, Augmented Dickey-Fuller (ADF) and Kwiatkowski-Phillips-Schmidt-Shin (KPSS); Jarque-Bera, Breusch-Godfrey LM and Heteroskedasticity tests for unit root, normal distribution, autocorrelation, and ARCH effect tests respectively. The diversification benefits and modelling of SA-REIT market price volatility were analysed using correlation matrix and generalised autoregressive conditional heteroskedasticity (GARCH 1, 1)Findings: Analysis of residual estimate of the series documents the evidence of volatility characterised by prolonged high and low clustering patterns for the period under review. The GARCH model reported that the previous day's information of both the daily market price (ARCH term) and the volatility (GARCH term) have a positive and significant (p

Keywords: GARCH; Model; Property stock; Stock market; Volatility (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2021-09-01
New Economics Papers: this item is included in nep-ets
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