Asymmetric effects of volatility in Iran and UAE stock marke
Subject Areas : Financial engineering
Esmaiel abouoori
1
(Department of Economics, Faculty of Economics, Management and Administrative Sciences, Semnan University, Semnan, Iran)
mohammd Noferesti
2
(Department of Economics, Faculty of Economics and political sciences, Shahid Beheshti University, Tehran, Iran)
Mansour tour
3
(Department of Economics,, Faculty of Economics, Management and Administrative Sciences, Semnan University, Semnan, Iran.)
Keywords: shock, volatility, stock index, asymmetric GARCH,
Abstract :
Choosing the right model to correctly forecasting volatility in these markets is very important. In this research, with a new approach in order to test the asymmetric volatility effects, the asymmetric conditional variance section (asymmetric volatility) was added to Bollerslev GARCH (1.1) model (1986). Then, using the weekly index information of the Iran and UAE stock market from December 15, 2008 until April 10, 2017 were estimated separately. Based on the results, the existence of asymmetric effects of increasing and decreasing volatility of the previous period on the current volatility of stock returns was confirmed in the UAE stock market and these asymmetric effects were not accepted in Iran stock market. In order to evaluate and compare the forecasting accuracy of the asymmetric GARCH model in volatility and a the symmetric GARCH model in the UAE stock market, "Root Mean Square Error Index" and "Theil Inequality Index" were calculated for these two models. Both indicators confirm the relative superiority of the asymmetric GARCH model over the symmetric model in this market. Therefore, the asymmetric model is the appropriate model to forecast volatility in the UAE stock market.
26- Schumpeter, J.A. (1911). The Theory of Economic Development. Harvard University Press, Cambridge.
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1 Abrishmi, Hamid, Mohsen Mehrara and Yasmin Ariana, (2016). Evaluating the performance of predictive models of oil price instability. Journal of Economic Research, 78, 1-21.
26- Schumpeter, J.A. (1911). The Theory of Economic Development. Harvard University Press, Cambridge.