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Research Article

EEO. 2020; 19(4): 4925-4933


Modeling Volatility In The Islamic Equity Market: A Case Of Pakistan

Dr. Mustafa Afeef, Dr. Nazim Ali, Dr. Anjum Ihsan, Najib Ullah.

Abstract
Return and risk walk off hand-in-hand. Many investors attempt to forecast the return associated with a potential future investment. But their ability to predict the volatility, or risk, involved with that return is no lessimperative. The study at hand is an endeavor to capture the variance in KSE Islamic All Share Index of Pakistan using the popular ARCH-GARCH modeling methods. Daily data of the Index were taken from November 2015 to June 2020 that led to 1117 observations.It was observed that KSE Islamic All Share Index did have ARCH effects implying that volatility in the Index was not stagnant at all throughout the period of study. In order to arrive at a more parsimonious model, the GARCH technique was also employed and significant results were drawn. Finally, the TGARCH model revealed asymmetries in the effect of negative and positive news on stock returns. It was found that negative or bad news had a deeper influence on the volatility of returns of the Index than positive or good news.

Key words: ARCH, GARCH, TGARCH, Volatility, KSE Islamic All Share Index, Prediction






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The articles in Bibliomed are open access articles licensed under the terms of the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License (https://creativecommons.org/licenses/by-nc-sa/4.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.