Capturing volatility of stock prices in Dhaka Stock Exchange (DSE) An approach of non-stochastic volatility models

Abstract

Time varying volatility is crucially important in many economic and financial areas. Investors in the stock markets are obviously interested in the volatility of stock prices. High volatility of return in financial market may discourage investors to invest in stock market and hence greater uncertainty. So we need to estimate the appropriate volatility model to capture the volatility. This study applies five time series forecasting volatility models such as Random Walk (RW), Historical Average (HA), Moving Average (MA), Exponential Smoothing (ES), Autoregressive Process (AP) and Simple Regression (SR) respectively to four selected companies of DSE. Result shows that in all four companies RW model capture volatility quite well among other competing models.

Keywords-
Volatility, closing price, return, volatility models.