Modeling and Forecasting Volatility: Evidence from Bosnia and Herzegovina
|Author:||Mgr. Emir Hečimović|
|Year:||2016 - summer|
|Leaders:|| Mgr. Petr Polák MSc.
|Work type:|| Masters
|Awards and prizes:|
|Abstract:||The purpose of this thesis is to research stock market volatility in Bosnia and
Herzegovina and provide comparison with regional and European stock markets. We
employ symmetric and asymmetric generalized autoregressive conditional
heteroskedasticity (GARCH) models in order to estimate the conditional volatility of
benchmark stock market indices in Bosnia and Herzegovina (SASX-10, BIRS),
former Yugoslavia region (CROBEX, BELEX15, SBI TOP) and Europe (EURO
STOXX50). Additionally, we analyze the evolution of conditional standard
deviations for selected markets and develop dynamic GARCH volatility forecasts for
SASX-10 and BIRS.
Our results suggest that Bosnia and Herzegovina markets are characterized with
relatively high persistence and long memory in volatility. However, compared with
regional and European markets, SASX-10 and BIRS exhibit lower persistence.
Although significant leverage effect was found both for regional and European
markets, asymmetric modeling produced insignificant and negative leverage effect
for SASX-10 and BIRS time series. Bosnia and Herzegovina stock markets display
moderate to low levels of synchronization with regional and European stock markets.
In general, SASX-10 was found to be more volatile than BIRS. The latter is,
surprisingly, the least volatile among all analyzed time series for the observed period.