Stock Market Volatility Analysis: A Case Study of TUNindex

Malika Neifar

MPRA Paper from University Library of Munich, Germany

Abstract: Volatility is directly associated with risks and returns. This study aims to examine the volatility characteristics on Tunisian stock market index (5 days a weak TUNindex) that include clustering volatility, leptokurtosis, and leverage effect. The first objective is then to use the GARCH type models to estimate volatility of the daily returns series, consisting of 2191 observations from 01/02/2011 to 19/11/2019, with no significant weekdays effect. We use both symmetric and asymmetric models. The main findings suggest that the symmetric GARCHM and asymmetric TGARCH /APGARCH models can capture characteristics of TUNindex whereas EGARCH reveals no significant support for leverage effect existence. Looking at news impact curves, GJR model appears to be relatively better than other models. However, the volatility of stock returns is more affected by the past volatility than the related news from the previous period. The second objective is to use GARCHM- X S models to capture the effect of macro-economic instability via exchange rate growth and exchange rate volatility. For policy, GARCHM-XS2 turned to be the best model. The macroeconomic environment should be favourable to ensure growth in the stock market. Policies to reduce volatility in the the economy (more stable exchange rate) are a necessity for stock market.

Keywords: Tunisia; Stock Market; Tunindex; Volatility; Symmetric and Asymmetric GARCH Models; GARCH; TGARCH; GARCH-M; EGARCH; GARCHM-XS; Leverage Effect.; Risk Premium; Stability. (search for similar items in EconPapers)
JEL-codes: C22 D8 D81 D82 E44 E47 O16 (search for similar items in EconPapers)
Date: 2020-03-17
New Economics Papers: this item is included in nep-ara, nep-ets, nep-fmk and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:99140

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