Abstract

We apply GARCH (p, q) and ARCH(m) model to the daily return of DSE general index (DGEN) ranging from 1^st January, 2002 to 30^th July 2013 for examining market volatility. Besides, we calculate year wise standard deviation of daily return of DGEN for the same period. The result of GARCH (1, 1) process and standard deviation of the daily return confirms an abnormal volatility episode from 2009 to 2012. The highest per day volatility was observed in the first half of 2011 in both investigations. The volatility rate found in GARCH (1, 1) process is 2.44% in 2011 followed by 2.00% and 1.99% in 2009 and 2012 respectively. The highest standard deviation of return is 2.99% in 2011 followed by 2.08% in 2012 authenticate the highest volatile periods of the study. We apply ARCH (m) model in 2004 and 2013 for volatility estimate due to inapplicability of GARCH (p, q) process in those market return. The results of ARCH (m) model confirm reliable estimates of market volatility, 1.10% and 1.46% respectively. This is a part of our total research work where our main focus is to detect the factors affecting market volatility and its spillover effects in emerging markets.

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