Volatility Behaviour in Emerging Stock Markets–A GARCH Approach

This study primarily focuses on three aspects - (i) volatility in the emerging stock markets across globe by application of GARCH family models, (ii) study of ARMA structures, and (iii) a comparison of symmetric and asymmetric volatility. In the last decade or so, investors from developed countries are mostly focusing on the emerging economics as their investment opportunities. They associate a good amount of risk premium with these countries as far as the risk and return are concerned with their investments. Investments drawn from developed nations seems to make stock markets of emerging nations more volatile as these investment are exposed to both irrational and rational factors. Hence it's imperative to understand the volatility behaviour of emerging stock markets over a period of time and also to study the comparative analysis of the volatility behaviours' across these markets. This draws us to revisit the topic on volatility behaviour considering the emerging markets for this study. In this paper an attempt is being made to estimate the volatility behaviour of stock markets of 10 emerging economics and hence concentrated on India, China, Indonesia, Sri Lanka, Pakistan, Russia, Brazil, South Korea, Mexico, and Hong Kong.