Modelling and Estimation of Volatility Using ARCH/GARCH Models in Jordan’s Stock Market

Dana Mohammad AL-Najjar

Asian Journal of Finance & Accounting, 2016, vol. 8, issue 1, 152167

Abstract: Financials have been concerned constantly with factors that have impact on both taking and assessing various financial decisions in firms. Hence modelling volatility in financial markets is one of the factors that have direct role and effect on pricing, risk and portfolio management. Therefore, this study aims to examine the volatility characteristics on Jordan’s capital market that include; clustering volatility, leptokurtosis, and leverage effect. This objective can be accomplished by selecting symmetric and asymmetric models from GARCH family models. This study applies; ARCH, GARCH, and EGARCH to investigate the behavior of stock return volatility for Amman Stock Exchange (ASE) covering the period from Jan. 1 2005 through Dec.31 2014. The main findings suggest that the symmetric ARCH /GARCH models can capture characteristics of ASE, and provide more evidence for both volatility clustering and leptokurtic, whereas EGARCH output reveals no support for the existence of leverage effect in the stock returns at Amman Stock Exchange.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:mth:ajfa88:v:8:y:2016:i:1:p:152167

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