Stock Market Crash and Stock Return Volatility: Empirical Evidence from Dhaka Stock Exchange

K. M. Zahidul Islam and Sayed Farrukh Ahmed
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K. M. Zahidul Islam: Associate Professor,, Postal: Institute of , Business Administration, Jahangirnagar University, , , Savar, Dhaka, Bangladesh.
Sayed Farrukh Ahmed: Assistant Professor,, Postal: Faculty of Business & Economics, Daffodil International , University, , Dhaka, Bangladesh

Bangladesh Development Studies, 2015, vol. 38, issue 3, 25-34

Abstract: This paper empirically investigates the impact of stock market crash on the volatility of Dhaka Stock Exchange stock return of Bangladesh with GARCH-type framework by using data of daily closing stock price indices of (DSE General Index) over the period from 9 November 2004 to 31 July 2013. The results of GARCH-M (1,1) model conclude that conditional standard deviation is negatively related to the level of returns. While this result is not consistent with the theory of a positive risk premium on stock indices, in special circumstances investors may not claim higher risk premium if they are competent enough to bear risk at times of specific volatility. Moreover, the model also confirms that stock market crash affected the volatility of DSE General Index return and there is a propensity for the volatility to erode over time.

Keywords: Dhaka Stock Exchange; Volatility; Crash; GARCH; Bangladesh (search for similar items in EconPapers)
JEL-codes: C22 C52 E32 G12 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:badest:0786

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