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Estimating volatility using GARCH models on the Romanian stock market

Author

Listed:
  • Dragoş Păun
  • Ioan-Alin Nistor
  • Eva Dezsi

Abstract

This paper aims to analyse the volatility of the Romanian market by employing GARCH models in order to assess the characteristics of the stock market. We investigate the presence of leverage effects and volatility clustering, mean-reversion, by employing symmetric and asymmetric models. The evolution of the volatility of a market is a good indicator of the uncertainty of the trading environment, and we wish to assess the state of the Romanian stock market in the light of the current economic and market conditions. We consider this to be important as the risk and return related to the stock market can be an indicator to the general view of the Romanian economy. The empirical investigation was conducted on the principal indexes from the Romanian stock exchange, from the day each index was listed until April 2017. The results indicate that on the Romanian market a strong persistence is observable for all the indexes, but, with the exception of BET and BET-FI, no asymmetric effects could be detected. Our results indicate that the Romanian market is mainly characterised by low and very low volatility, with short periods of spikes in high volatility.

Suggested Citation

  • Dragoş Păun & Ioan-Alin Nistor & Eva Dezsi, 2021. "Estimating volatility using GARCH models on the Romanian stock market," International Journal of Economics and Accounting, Inderscience Enterprises Ltd, vol. 10(3), pages 310-320.
    • Handle: RePEc:ids:ijecac:v:10:y:2021:i:3:p:310-320
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