The book threw light on the growth and development of the stock market and observed that the development of the stock market highly depends on volatility and forecasting is an important area of research in financial market. The book measured the extent of stock price volatility in select companies of Automobile, Infrastructure, Manufacturing, Pharmaceutical and Services and identified suitable model for forecasting the volatility of the share prices in India. It evaluated the comparative ability of different statistical and econometric forecasting models in the context of Indian Stocks. Three different competing models were considered for the book and for forecasting performance of different models two forecasting error statistics viz., Root Mean Square Error (RMSE) and the Mean Absolute Error (MAE) were used and the best model was suggested for each sector. The EGARCH model provides the most accurate forecast compared to other competing models in the book. The book also made a few observations which may help the investors to understand better about the stock market.
This book shed light upon the efficiency of Indian stock market by examining the causal and contemporaneous relationship between volume and return, and volume and volatility. It would further help to comment upon whether the introduction of various reforms causes change in the price discovery efficiency in terms of return-volume linkage. Studying the relations between the returns, volatility and trading volume in the India would help to uncover whether the Indian stock market exhibits a positive price-volume relations as found in mature markets. This book would further enable us to uncover whether the price-volume relation in the Indian stock market exhibits different characteristics from those in developed markets. In fact, the different characteristics of the Indian stock market with respect to information flows and institutional structure can provide new insight into the price volume relation. This book would also enhance the understanding of market asymmetry, market efficiency and information processing of Indian stock market. Thus, studying the joint dynamics of return, volatility and volume will surely strengthen the power of investors for making strategies in Indian market.
This is a comprehensive study of • Volatility measurement and comparison between cash and futures markets of NSE, Mumbai. • Impact of derivatives trade upon cash segment of stock market • Determination of market among cash and futures which react to flow of information faster and hence leads the other in a minute wise break up of data • Price discovery of futures in Indian stock market. The study offers an insightful look upon the extent to which derivatives trade stabilize or destabilize the underlying cash market and how should these risks be addressed.The study and results of this study are crucial to investors, stock exchange officials, regulators, academicians, practitioners and researchers. Derivatives play an important role in price discovery process and in completing the market. Their role in risk management for institutional investors and mutual fund managers need hardly be overemphasized.
Volatility in Capital Markets has been an important issue since the development of capital markets across globe, however with the pioneering models by Robert Engle and Bollerslev, the study of stock market volatility has bought new dimensions in the financial literature. This book also emphasizes the study of volatility in Indian Capital Market after the introduction of financial derivatives in comparison to the pre-derivative period. The very purpose of introduction of financial derivatives in Indian Capital Market is to stabilize the price fluctuations. However, it’s always been debated concerning the introduction of derivative instruments and their effectiveness in curbing the volatility and through this book a small attempt is being made to emphasize the issue. The book may help Investors, Portfolio Managers, Professional Money Managers, Researchers, Academicians and Policy Makers in understanding the extent to which financial derivative has stabilize the volatility in Indian Stock Market.
This book explores a number of statistical models for predicting the daily stock return volatility of an aggregate of all stocks traded on the Johannesburg Stock Exchange (JSE). The study is largely inspired by the work of Chris BrookThe volume of shares traded might be as important as the change in a market index since substantial price increases and decreases are often accompanied by heavy trading activitys (1998).The results of this study project indicate that augmenting models of volatility with measures of lagged volume leads only to fairly small improvements in forecasting performance. The report also shows that the Johannesburg Stock Exchange is vulnerable to financial turmoil in other major markets.
Volatility is an important phenomenon in any market in general and stock markets in particular. Analysing stock market volatility has been subject matter of great concern to policy makers and practioners. The book attempts to analyse nature and pattern of volatility of Indian Stock Markets using ARCH/GARCH classes of models. The book follows a unique approach to analyse the data set using EViews software. It explains step-by-step procedure to carry out the data analysis. This makes the analysis and interpretation easy to understand and follow. Any researcher who wants to perform time series data analysis will certainly find the approach useful.
Research for developing price forecasting tools in deregulated markets is at an intermediate stage. Researchers have developed various forecasting models covering most of the deregulated markets. The researchers have paid more attention towards price forecasting in day-ahead electricity markets as compared to real-time electricity markets; whereas, price forecasting in real time electricity markets is difficult as compared to day-ahead electricity markets. Short term price forecasting (STPF) is a complex task because price series is highly volatile with non-constant mean and variance, which is due to non-storable nature and stiff condition of maintaining real time balance of demand and supply of electricity. Considering these points, this work addresses two main issues: first, it discusses the state of the art in short term price forecasting (STPF) and provides an overview of the available literature on STPF models and explain various key issues while developing a price forecasting model; and secondly, it performs an assessment, detailed comparison and evaluation of the forecasting performance of various linear and non-linear models in real time single settlement markets.
An A to Z options trading guide for the new millennium and the new economy Written by professional trader and quantitative analyst Euan Sinclair, Option Trading is a comprehensive guide to this discipline covering everything from historical background, contract types, and market structure to volatility measurement, forecasting, and hedging techniques. This comprehensive guide presents the detail and practical information that professional option traders need, whether they're using options to hedge, manage money, arbitrage, or engage in structured finance deals. It contains information essential to anyone in this field, including option pricing and price forecasting, the Greeks, implied volatility, volatility measurement and forecasting, and specific option strategies. Explains how to break down a typical position, and repair positions Other titles by Sinclair: Volatility Trading Addresses the various concerns of the professional options trader Option trading will continue to be an important part of the financial landscape. This book will show you how to make the most of these profitable products, no matter what the market does.
In 2007, as the US subprime mortgage market began to fall down, which reached its peak with the catastrophic collapse of the Lehman Brothers, no one was aware of that this was going to be the worst financial crisis since the Great Depression. Evaluating the advantages and disadvantages connected with financial globalization demands a pure understanding of the influence of international market integration and financial volatility. This work therefore focuses on the analysis of the integration of stock markets and forecast performances of stock market and macroeconomic volatility for the period of last global, financial crisis. It has explores the effects of financial volatility during the last global crisis. Moreover, it underlies the importance of stock market volatility during financial crises and introduces another important tool to assess the volatility clustering behavior, namely macroeconomic volatility.
This book compares the efficacy of Black–Scholes implied volatility with model-free implied volatility in providing volatility forecasts in the framework of Canadian S&P/TSX 60 stock index option. In-sample volatility forecasts show that both MVX and VIXC significantly improve the fit of a GJR–GARCH(1,1) model. However, VIXC dominates MVX for predicting future volatility. Out-of-sample volatility forecasts also indicate that VIXC outperforms MVX for the 1-, 5-, 10-, and 22-day forecasting horizons. we also investigate the predictive power between VIXC and alternative volatility forecasts derived from historical index prices.We find that for time horizons lesser than 10-trading days, VIXC provides more accurate forecasts. However, for longer time horizons, the historical volatilities, particularly the random walk, provide better forecasts.
A volatile foreign exchange market takes a toll on the economy’s international competitiveness. Excess forex volatility affects the stock markets and international trade as well. The negative impact may even spread to other countries in form of volatility spillover. This study aims to analyze the volatility dynamics in context of Indian Rupee vis-a-vis some selected foreign currencies. In that process, it uses ARCH models, long memory and structural breaks to examine the nature of volatility. The study then investigates any possible volatility spillover from stock markets to understand the possible source of exchange rate volatility. However, the stock markets fail to explain the exchange rate volatility completely. To understand the underlying volatility dynamics, the possible non-linear nature of the exchange rates is examined. All exchange rates turn out to be chaotic in nature. It has some serious policy implications as in a chaotic foreign exchange market long term policies are often rendered useless. The study empirically establishes this fact by showing that in chaotic foreign exchange market government interventions to contain volatility does not actually work.
Stock prices fluctuation has always been the crucial topic in the field of financial research. Various researchers around the world present their theories, model to make clarification about the determinants of stock prices. There are some models and theories efficient with regard to stock price determination, but the reliability of the model working in one market may not be the same in other market of the world. Most of the studies regarding the stock price volatility were conducted in context of advance countries so there is need to test the predictability power of models in context of developing countries like Pakistan. This book provides evidence with regard to the factors effecting the stock prices in oil and gas sector of Pakistan along with applicability of the famous model of Baskin and certain control variables suggested by the researchers around the world. This study also highlighted the importance of industry consideration in the stock price volatility analysis.
This study examined long-term relationships between oil prices from OPEC reference basket and stock prices of 12 oil and gas companies listed on the Karachi Stock Exchange as well as with their respective trade volumes. Since oil is the major input for oil companies so they are bound to be susceptible to fluctuations in the value of international crude. This study was conducted to estimate cointegration between oil price volatility and stock prices as well as oil price and trading volume of oil companies trading on KSE and to identify the long run behavior and to adjust the short term disequilibrium with other periods of the long run.
Over the years, Indian stock market has grown tremendously in terms of market turnover, market indices and market capitalization. It features a developed regulatory environment, a modern market infrastructure, better allocation and mobilization of resources and a rapidly developing stock market. The application of other models and also examination of size effect for the portfolios along with seasonal anomaly will throw interesting light on the working of the an emerging market like India. The stock markets within a specific region as well as across different regions are found to be closely integrated, exhibiting uniform patterns of movement across different months and weeks. Stock markets within specific regions show no significant variation in volatility. However, there is significant variation in volatility in stock exchanges in different regions of the world. Hence, only a few companies selected on this study, future research will be focused on select with attempt to understand the seasonal pattern and extent of stock market volatility across time periods and across courtiers.
This work evaluates several hundred one-day-ahead VaR forecasting models in the time period between the years 2004 and 2009 on data from six world stock indices - DJI, GSPC, IXIC, FTSE, GDAXI and N225. The models model mean using the AR and MA processes with up to two lags and variance with one of GARCH, EGARCH or TARCH processes with up to two lags. The models are estimated on the data from the in-sample period and their forecasting accuracy is evaluated on the out-of-sample data, which are more volatile. The main aim of the work is to test whether a model estimated on data with lower volatility can be used in periods with higher volatility. The evaluation is based on the conditional coverage test and is performed on each stock index separately. Unlike other works in this field of study, this work does not assume the log-returns to be normally distributed and does not explicitly select a particular conditional volatility process. Moreover, the work takes advantage of a less known conditional coverage framework for the measurement of forecasting accuracy.