Comparative Study of Volatility Forecasting Models: The Case of Malaysia, Indonesia, Hong Kong and Japan Stock Markets

Lee, San K.; Nguyen, Lan Thi

doi:10.17265/2328-7144/2017.04.002

JEW

2017

DOI: 10.17265/2328-7144/2017.04.002

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Comparative Study of Volatility Forecasting Models: The Case of Malaysia, Indonesia, Hong Kong and Japan Stock Markets

San K. Lee¹,

Lan Thi Nguyen²

Abstract: the four selected countries, results obtained confirm that volatility in developed markets is not necessarily always lower than the volatility in emerging markets. Among all the three models, GARCH (1, 1) model is found to be the best forecasting model for stock markets in Malaysia, Indonesia, and Japan, while EWMA model is found to be the best forecasting model for Hong Kong stock market. The outperformance of GARCH (1, 1) found supports again what is found in Minkah (2007).

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Cited by 2 publications

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Return Volatility and Macroeconomic Factors: A Comparison of US and Pakistani Firms

Jan¹,

Khan²

2018

BER

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This study explores the effect of selected economic factors on stock return volatility along with asymmetry and leverage effects on comparative basis of the New York Stock Exchange (NYSE) and Pakistan Stock Exchange (PSX). These dimensions are further investigated with respect to size and age of the firms. The daily stock returns of all the firms on both NYSE and PSX and macroeconomic factors are considered for the period 2000-2015. The results from GARCH (1, 1) revealed that all the economic factors have proven their significance in determining the stock returns volatility in both the markets with respect to firm's size and age. More precisely, a negative relationshi p is observed for market returns (MR), exchange rate (EXR), and oil returns (OIL) with stock return volatility for majority of the firms in both stock markets. Furthermore, risk-free rate (RFR) showed positive and negative effect on the stock return volatility of majority of the firms in NYSE and PSX markets respectively. However, with respect to size and age effects, firms in both the markets exhibited entirely different behavior for all the macroeconomic factors. Further, using EGARCH model, an evidence of asymmetry and leverage effect (with negative coefficient) is found in NYSE and partial evidence (both negative and positive coefficients) in PSX is observed. Again, these results vary with respect to firms' features in both the markets. Therefore, the results of the current study clearly show that there are significant differences in both markets and the investors can diversify their investments and shape their liquidity positions in both markets in order to exploit the maximum benefits from the market and firms specific factors.

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Return Volatility and Macroeconomic Factors: A Comparison of US and Pakistani Firms

Jan¹,

Khan²

2018

BER

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Lagged Effect Of Macroeconomic Variables On Stock Returns: A Case Of Firm Size

2021

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The evidence of lagged effect regarding firm size between macroeconomic factors and stock returns is found with GARCH model for the UAE firms. More precisely, exchange rate showed a significant effect on stock returns irrespective of size group and lag level. However, a positive effect is observed at lag four and a negative effect is observed on lag five and two for small and large size firms respectively. For majority of the firms in small size, the risk-free rate showed a negative lagged effect on stock returns; however, for the majority of the firms in large size, it showed a positive lagged effect on stock returns. Inflation also showed a significant effect on stock returns on each lag level except for large firms where at lag five it is insignificant. Moreover, as the lags increase from 1- 4 and size from small to large, the negative effect of inflation converts to positive effect on stock returns. The lag effect of real activity showed both positive and negative effects on relatively larger stock returns of small firms than big firms. Money supply showed positive significant effect on stock returns of all firms irrespective of the size group; however, this relationship is even more prominent at lag five. Finally, the oil prices showed a positive effect on stock returns (large size) which further maximizes at lag two; whereas, a negative maximization takes place at lag three. Hence, investors can make informed and effective decisions and UAE policymakers developed effective measures to control and promote macroeconomic growth and stability.

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Comparative Study of Volatility Forecasting Models: The Case of Malaysia, Indonesia, Hong Kong and Japan Stock Markets

Cited by 2 publications

References 7 publications

Return Volatility and Macroeconomic Factors: A Comparison of US and Pakistani Firms

Return Volatility and Macroeconomic Factors: A Comparison of US and Pakistani Firms

Lagged Effect Of Macroeconomic Variables On Stock Returns: A Case Of Firm Size

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