Stock Market Volatility Measure Using Non-Traditional Tool Case of Germany

Naeem Ahmed and Sarfraz Mudassira
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Sarfraz Mudassira: COMSATS University, Islamabad, Pakistan

Economics and Business, 2018, vol. 32, issue 1, 126-135

Abstract: This study examines the stock market volatility of German bench-mark stock index DAX 30 using logarithmic extreme day return. German stock markets have been analyzed extensively in literature. We look into volatility issue from the standpoint of extreme-day changes. Our analysis indicates the non-normality of German stock market and higher probability of negative trading days. We measure the occurrences of extreme-day returns and their significance in measuring annual volatility. Our time series analysis indicates that the occurrences of extreme-days show a cyclical trend over the sample time period. Our comparison of negative and positive extreme-days indicates that negative extreme-days overweigh the positive extreme days. Standard deviation, as measure of volatility used traditionally, gives altered ranks of annual volatility to a considerable extent as compared to extreme-day returns. Lastly, existence of extreme day returns can be explained by past period occurrences, which show predictability.

Keywords: Extreme-day return; non-normality; standard deviation; volatility; volatility ranking (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ecobus:v:32:y:2018:i:1:p:126-135:n:10

DOI: 10.2478/eb-2018-0010

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