Masters Degrees (Statistics)

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Garch modelling of volatility in the Johannesburg Stock Exchange index.
(2013) Mzamane, Tsepang Patrick.; Achia, Thomas Noel Ochieng.; Mwambi, Henry G.
Modelling and forecasting stock market volatility is a critical issue in various fields of finance and economics. Forecasting volatility in stock markets find extensive use in portfolio management, risk management and option pricing. The primary objective of this study was to describe the volatility in the Johannesburg Stock Exchange (JSE) index using univariate and multivariate GARCH models. We used daily log-returns of the JSE index over the period 6 June 1995 to 30 June 2012. In the univariate GARCH modelling, both asymmetric and symmetric GARCH models were employed. We investigated volatility in the market using the simple GARCH, GJR-GARCH, EGARCH and APARCH models assuming di erent distributional assumptions in the error terms. The study indicated that the volatility in the residuals and the leverage effect was present in the JSE index returns. Secondly, we explored the dynamics of the correlation between the JSE index, FTSE-100 and NASDAQ-100 index on the basis of weekly returns over the period 6 June 1995 to 30 June 2012. The DCC-GARCH (1,1) model was employed to study the correlation dynamics. These results suggested that the correlation between the JSE index and the other two indices varied over time.