Modeling Stock Returns Volatility of the Nairobi Securities Exchange Index and Other Indices

Citation:
Kalovwe SK, Mwaniki IJ. "Modeling Stock Returns Volatility of the Nairobi Securities Exchange Index and Other Indices." Journal of Advanced Statistics. 2016;1(2):87-93.

Abstract:

This paper seeks to model daily, weekly and monthly stock indices returns using GARCH
(1,1) model which is expected to reproduce most of the stylized facts of financial time series data which,
in most cases, are found in different types of market. In addition, the distributional behavior of returns
as the data changes from daily through to monthly returns is investigated by performing the JB and
K-S tests. The results indicate evidence of volatility clustering, leverage effects, Gaussianity and
leptokurtic distribution in the stock returns. A key observation is that the monthly returns of the three
indices follow a Gaussian distribution (i.e. as the data changes from daily through to monthly returns
it follows a normal distribution)

Notes:

Keywords:
GARCH,Gaussianity, Stock returns, volatility, heteroscedasticity.

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