Volatility of Stock Prices in Tanzania: Application of Garch Models to Dar Es Salaam Stock Exchange

Abstract

We use Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models to examine volatility of stock prices for firms listed in the Dar es Salaam Stock Exchange (DSE). In doing so, both symmetric and asymmetric GARCH models are used in this study. The descriptive analysis of the data shows that standard deviation of the series returns is high, indicating a high level of daily fluctuations, and the log value of the mean is close to zero. Our empirical results clearly exhibit evidence of volatility and volatility clustering, a typical feature of financial time series. Moreover, our results indicate that the series are highly leptokurtic, flat tailed and asymmetric consistent with characteristics of financial time series data. Out of all models examined, EGARCH (1,1) and GARCH (1,1) seem to perform plausibly better than others.Contribution/ Originality: This study contributes to the existing literature through the application of both GARCH and the EGARCH models in order to capture both symmetry and asymmetry effects, and determines key characteristics of stock returns at Dar es salaam Stock Exchange.

Prediksi Volatilitas Indeks Harga Saham Gabungan Menggunakan GARCH

“…Sudah banyak penelitian volatilitas saham yang menggunakan GARCH seperti perbandingan kinerja model GARCH untuk menangkap volatilitas pasar saham di Malaysia (Lim & Sek, 2013); pemodelan volatilitas pasar saham Bulgaria, Chechnya, Polandia, Hungaria dan Turkey (Ugurlu et al, 2014); Sudan dan Mesir (Abdala et al, 2014); Uganda (Namugaya et al, 2014); Kenya (Koima et al, 2015); Bangladesh (Miah & Rahman, 2016); Afrika Selatan dan Tiongkok (Cheteni, 2016); Tanzania (Kazungu & Mboya, 2021). Untuk prediksi volatilitas harga saham menggunakan GARCH sudah ada beberapa penelitian yang dilakukan seperti penelitian terhadap indeks saham S&P-500 (Awartani & Corradi, 2005); akurasi peramalan volatilitas di pasar saham Swedia (Grek, 2014); pemodelan dan peramalan volatilitas di Dhaka Stock Exchange (Ahmed & Naher, 2021); peramalan 21 indeks saham dunia (Sharma, 2015).…”