Analysis of the Relationship Between Stock Prices and Their Volatilities

Ao Long

Master's thesis

Anotácia:

In this thesis, the main purpose is to test the relationship between the stock price index and their volatilities by using the returns from daily stock prices. Generally, the volatility of stock prices is shown by its standard deviation or variance, and the value of variance is chosen to represent volatility in this paper. Consequently, the relationship between the conditional variance, which is the volatility, and the stock price index is analyzed by applying different forecasting models to the log returns of the stock price indexes to perform correlation and regression tests and testing the conditional variance and residual terms from the models. For the chapter 2 of this paper, the portfolio of basic financial markets will be introduced. And there are the basic information about the 8 stock price indexes selected in Asia stock markets and their exchanged market. In the next section chapter 3, firstly there is the introduction the volatility of stock price index and the methodologies we used for analyzing the relationship between the indexes and volatilities. The main selected models are the time series models including the Exponentially Weighted Moving Average (EWMA), the Autoregressive conditional heteroskedasticity model (ARCH), Generalized Autoregressive ConditionalHeteroskedasticity model (GARCH), GARCH-in-mean model and the exponential general autoregressive conditional heteroskedastic model (EGARCH). Furthermore, by using an econometrics Software which is Econometrics Views (EViews) to calculate the selected models, it is observed that the relationships mentioned in chapter 3 have asymmetry and leverage effect

Abstract:

In this thesis, the main purpose is to test the relationship between the stock price index and their volatilities by using the returns from daily stock prices. Generally, the volatility of stock prices is shown by its standard deviation or variance, and the value of variance is chosen to represent volatility in this paper. Consequently, the relationship between the conditional variance, which is the volatility, and the stock price index is analyzed by applying different forecasting models to the log returns of the stock price indexes to perform correlation and regression tests and testing the conditional variance and residual terms from the models. For the chapter 2 of this paper, the portfolio of basic financial markets will be introduced. And there are the basic information about the 8 stock price indexes selected in Asia stock markets and their exchanged market. In the next section chapter 3, firstly there is the introduction the volatility of stock price index and the methodologies we used for analyzing the relationship between the indexes and volatilities. The main selected models are the time series models including the Exponentially Weighted Moving Average (EWMA), the Autoregressive conditional heteroskedasticity model (ARCH), Generalized Autoregressive ConditionalHeteroskedasticity model (GARCH), GARCH-in-mean model and the exponential general autoregressive conditional heteroskedastic model (EGARCH). Furthermore, by using an econometrics Software which is Econometrics Views (EViews) to calculate the selected models, it is observed that the relationships mentioned in chapter 3 have asymmetry and leverage effect

Kľúčové slová

Stock Price, Indexes, Rate of Return, Volatility, EWMA model, ARCH model, GARCH-like model, Leverage asymmetry

Keywords

Stock Price, Indexes, Rate of Return, Volatility, EWMA model, ARCH model, GARCH-like model, Leverage asymmetry

Jazyk práce: English

Datum vytvoření / odevzdání či podání práce: 22. 4. 2022

Obhajoba závěrečné práce

• Obhajoba proběhla 24. 5. 2022
• Vedúci: Tomáš Tichý
• Oponent: Petr Seďa

VSB – Technical University of Ostrava

Ekonomická fakulta

Master programme:
Finance