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Test of Volatile Behaviors with the Asymmetric Stochastic Volatility Model: An Implementation on Nasdaq-100

Author

Listed:
  • Elchin Suleymanov

    (National Observatory on Labour Market and Social Protection Affairs, Baku AZ1005, Azerbaijan
    Department of Finance, Baku Engineering University, Khirdalan AZ0101, Azerbaijan)

  • Magsud Gubadli

    (Department of Finance, Baku Engineering University, Khirdalan AZ0101, Azerbaijan
    School of Business, Khazar University, Baku AZ1005, Azerbaijan)

  • Ulvi Yagubov

    (Department of Finance, Baku Engineering University, Khirdalan AZ0101, Azerbaijan
    School of Business, Azerbaijan State University of Economics, Baku AZ1005, Azerbaijan)

Abstract

The present study aimed to investigate the presence of asymmetric stochastic volatility and leverage effects within the Nasdaq-100 index. This index is widely regarded as an important indicator for investors. We focused on the nine leading stocks within the index, which are highly popular and hold significant weight in the investment world. These stocks are Netflix, PayPal, Google, Intel, Microsoft, Amazon, Tesla, Apple, and Meta. The study covered the period between 3 January 2017 and 30 January 2023, and we employed the EViews and WinBUGS applications to conduct the analysis. We began by calculating the logarithmic difference to obtain the return series. We then performed a sample test with 100,000 iterations, excluding the first 10,000 samples to eliminate the initial bias of the coefficients. This left us with 90,000 samples for analysis. Using the results of the asymmetric stochastic volatility model, we evaluated both the Nasdaq-100 index as a whole and the volatility persistence, predictability, and correlation levels of individual stocks. This allowed us to evaluate the ability of individual stocks to represent the characteristics of the Nasdaq-100 index. Our findings revealed a dense clustering of volatility, both for the Nasdaq-100 index and the nine individual stocks. We observed that this volatility is continuous but has a predictable impact on variability. Moreover, apart from Intel, all the stocks in the model exhibited both leverage effects and the presence of asymmetric relationships, as did the Nasdaq-100 index. Overall, our results show that the characteristics of stocks in the model are like the volatility characteristic of the Nasdaq-100 index and can represent it.

Suggested Citation

  • Elchin Suleymanov & Magsud Gubadli & Ulvi Yagubov, 2024. "Test of Volatile Behaviors with the Asymmetric Stochastic Volatility Model: An Implementation on Nasdaq-100," Risks, MDPI, vol. 12(5), pages 1-20, May.
    • Handle: RePEc:gam:jrisks:v:12:y:2024:i:5:p:76-:d:1388278
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    References listed on IDEAS

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    4. Ding, Haoyuan & Chong, Terence Tai-leung & Park, Sung Y., 2014. "Nonlinear dependence between stock and real estate markets in China," Economics Letters, Elsevier, vol. 124(3), pages 526-529.
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