Estimating the volatility of stock price index for Indian market using GARCH model

Abstract

The proposed work studies the volatility pattern of NSE (National Stock exchange) stock market at its opening price for a period of ten years (2008-2017). In financial market, the most widely used measure is volatility, which shows the dispersion of stock market returns over a period. In general, the volatility measure the risk associated with the stock market; if the volatility is high, the risk is higher and vice versa. This can help an investor to differentiate between low risk and high risk stock indexes and to invest sensibly. In this paper we build a model for getting the volatility of stock market return based in NSE ten years value. We have calculated daily, monthly and yearly volatility and concluded that Year wise has the highest risk associated. Then we build the GARCH model to predict the volatility based on the historic value of NSE data. In this way in the proposed work, we have devised a way to predict the volatility of NSE using GARCH model.

Subject Classification:

• 62M10
• 86A32

Keywords:

• GARCH
• Volatility model
• Stock market index
• Conditional variance