Modeling of Volatility in the Stock Markets Returns: Classic and Bayesian GARCH Approaches for ISE -100

Muhammet Burak Kılıç, İsmail Çelik and Murat Kaya
Additional contact information
Muhammet Burak Kılıç: Mehmet Akif Ersoy University
İsmail Çelik: Mehmet Akif Ersoy University
Murat Kaya: Mehmet Akif Ersoy University

Business and Economics Research Journal, 2017, vol. 8, issue 4, 715-726

Abstract: The accuracy of estimate in the investment risk is important for the potential investors as well as the expected return from the investment characteristics. One of the most fundamental issues on risk and return is to have the heavy tailed behavior of the residuals that makes it difficult to obtain an appropriate risk prediction model for index returns in financial studies. In this study, Istanbul stock exchange (ISE-100) daily index data between February 2007 and February 2017 is analyzed with the classic and Bayesian GARCH (1,1) models and it is aimed to compare the effects of them on return volatility with Student-t residuals. As a result of this study, no significant differences are found between the classical and Bayesian GARCH (1,1)-Student-t models both effects of shock on volatility and volatility persistence for stock return. This can be interpreted as both models not well differentiated from each other. In conclusion, classical and Bayesian GARCH (1,1)-Student-t estimation methods provide reliable results both in modeling volatility of returns and in estimating investment risk for investors and market regulators.

Keywords: ISE-100; Stock Returns; Volatility; Student-t Distribution; Bayesian Approaches (search for similar items in EconPapers)
JEL-codes: C46 C58 G11 G12 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.berjournal.com/modeling-of-volatility- ... proaches-for-ise-100 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:buecrj:0298

Access Statistics for this article

Business and Economics Research Journal is currently edited by Adem Anbar

More articles in Business and Economics Research Journal from Uludag University, Faculty of Economics and Administrative Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Adem Anbar ().