Determining the Best Arch/Garch Model and Comparing JKSE with Stock Index in Developed Countries

Authors

  • Kharisya Ayu Effendi Widyatama University, Bandung

DOI:

https://doi.org/10.21512/tw.v16i2.1560

Keywords:

ARCH/GARCH, return stock, stock price

Abstract

The slow movement of Indonesia economic growth in 2014 due to several factors, in internal factors; due to the high interest rates in Indonesia and external factors from the US which will raise the fed rate this year. However, JKSE shows a sharp increase trend from the beginning of 2014 until the second quarter of 2015 although it remains fluctuate but insignificant. The purpose of this research is to determine the best ARCH/ GARCH model in JKSE and stock index in developed countries (FTSE, Nasdaq and STI) and then compare the JKSE with the stock index in developed countries (FTSE, Nasdaq and STI). The results obtained in this study is to determine the best model of ARCH / GARCH, it is obtained that JKSE is GARCH (1,2), while the FTSE obtains GARCH (2,2), NASDAQ produces the best model which is GARCH (1,1) and STI with GARCH (2,1), and the results of the comparison of JKSE with FTSE, NASDAQ and STI are that even though JKSE fluctuates with moderate levels but the trend shown upward trend. This is different with other stock indexes fluctuated highly and tends to have a downward trend.

Author Biography

Kharisya Ayu Effendi, Widyatama University, Bandung

Faculty of Business and Management

References

Al-Raimony, A. D., & El-Nader, H. M. (2012). The Sources of Stock Market Volatility in Jordan. International Journal of Economics and Finance, 4(11).

Al-Raimony, A. D., & El-Nader, H. M. (2012). The Impact of Macroeconomic Factors on Amman Stock Market Returns. International Journal of Economics and Finance, 4(12).

Bollerslev, T. (1986). Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics, 31(3), 307-327.

Enders, W. (1995). Applied Econometrics Time Series. New York: John Wiley and Sons.

Engle, R. F (1982), Autoregressive Conditional Heteroskedasticity with Estimates of the Variance of UK Inflation. Econometrica, 50(4), 987-1008.

Gujarati. (2003), Econometría, México: McGraw Hill.

Jati, K. (2014). Analysis of Sugar Prices Volatility Using ARMA and ARCH/GARCH. International Journal of Trade, Economics and Finance, 5(2), 136-141.

McClain, K. T., Humphreys, H. B. (1996), Measuring Risk in The Mining Sector with ARCH Model with Important Observations on Sample Size. Journal of Empirical Finance, 3(4), 369-39.

Martono, Harjito. (2007), Management in Finance. Djogjakarta: Ekonisia.

Nastiti, S. (2012). Volatility Analysis of Stocks Companies Go Public with ARCH - GARCH method. Jurnal Sains dan Seni ITS, 1(1).

Sawidji, W. (2005). Healthy Ways to Invest in Stock Market. Jakarta: PT. Elex Media Komputindo.

Urooj, S.F., Zafar, N., & Durrani, T.K. (2009). Finding the Stock Return Volatility: A Case od KSE-100 Index. Interdisciplinary Journal of Contemporary Research in Business, 1(4), 65-80. Website Yahoo Finance http://finance.yahoo.com

Winarno, W.W. (2009). Analisis Ekonometrika dan Statistika dengan EViews. Yogyakarta: UPP STIM YKPN.

Downloads

Published

2015-09-30
Abstract 402  .
PDF downloaded 392  .