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Stock Market Volatility Measure Using Non-Traditional Tool Case of Germany

Author

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  • Ahmed Naeem

    (COMSATS University, Islamabad, Pakistan)

  • Sarfraz Mudassira

    (COMSATS University, Islamabad, Pakistan)

Abstract

This study examines the stock market volatility of German bench-mark stock index DAX 30 using logarithmic extreme day return. German stock markets have been analyzed extensively in literature. We look into volatility issue from the standpoint of extreme-day changes. Our analysis indicates the non-normality of German stock market and higher probability of negative trading days. We measure the occurrences of extreme-day returns and their significance in measuring annual volatility. Our time series analysis indicates that the occurrences of extreme-days show a cyclical trend over the sample time period. Our comparison of negative and positive extreme-days indicates that negative extreme-days overweigh the positive extreme days. Standard deviation, as measure of volatility used traditionally, gives altered ranks of annual volatility to a considerable extent as compared to extreme-day returns. Lastly, existence of extreme day returns can be explained by past period occurrences, which show predictability.

Suggested Citation

  • Ahmed Naeem & Sarfraz Mudassira, 2018. "Stock Market Volatility Measure Using Non-Traditional Tool Case of Germany," Economics and Business, Sciendo, vol. 32(1), pages 126-135, July.
    • Handle: RePEc:vrs:ecobus:v:32:y:2018:i:1:p:126-135:n:10
    DOI: 10.2478/eb-2018-0010
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    References listed on IDEAS

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    Cited by:

    1. Kelvin Mutum, 2020. "Volatility Forecast Incorporating Investors’ Sentiment and its Application in Options Trading Strategies: A Behavioural Finance Approach at Nifty 50 Index," Vision, , vol. 24(2), pages 217-227, June.

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