International comparisons of stock market volatility Essay

Inter guinea pig comparisons of stock securities industry irritability - Essay ExampleEven researchers and practitioners have do modeling of stock capriciousness a subject of empirical and theoretical study. Historically, stock market volatility is approximately 20% per annum and 5.8% per month even though periods of high and low volatilities are experienced. During the financial crisis, on that point was a 50 percent drop in stock prices. The effects of the crisis are still beingness felt due to increased public and private debt, levels of unemployment and global capitalism. The governments are doing their best to prevent and convey the situation buy formulating new policies and reforming major sectors. unpredictability measures the degree of variability between stock prices. In other words, it determines the degree of deviation between the current price of an asset and the average past price. To go steady volatility, it is important to take a look at the nature and trends of global markets and the correlation of the stock market returns. For many investors, volatility is a risk, thus, it is to be taken into consideration in analyzing their portfolios. Some of the factors that lead to volatility include changes in technology, new financial instruments such as derivatives and the increased integration of global markets. Volatility is measurable, and the commonly social occasiond measure is Chicago Board Options Exchange world power (CBOE) of implied (VIX) volatility. In this paper, we will call a sample of 19 emergent markets economies (EMEs) and essential market in Europe, Latin America, Middle easternmost and Asia as a basis of comparison on the stock markets volatility. Most of the previous(prenominal) research papers focused on regional and local stock markets but due to the national integration that is linking markets globally, we use will compare countries from different continents (Beirne et al 2008). Nature of stock markets in rising an d developed markets Global markets consist of appear and developed stock markets. A few studies have been through to examine the characteristics of emerging markets. According to these studies, emerging markets are characterized by higher average returns, low correlations with developed markets, higher volatility and more predictability of returns (Chukwuogor 2008). Their main argument was that volatility in emerging markets is high and nasty especially in the segmented markets. Segmented markets are influenced by local factors. Their returns tend to be skew and highly non-normally distributed. Volatility in emerging markets has been declining following capital market capitalization. The correlation in emerging markets is quite higher than in the developed markets due to lack of diversification and trading depths (Chukwuogor 2008). The volatility in these markets is highly influenced by social, political, economic factors. Data and methodology The studies also focused only on the emerging markets and not developed markets. We will use daily returns and volatilities of such returns for the 19 countries using data from 2001 to 2009. We use the GARCH model to determine the means and variances of stock returns in these countries. The Standard and Poor (S & P) index is used to sheer(a) the countries. Below is a table showing the emerging and developed markets. TABLE 1 Country Index USA S&P 500 UK FTSE 100 France CAC 40 Germany DAX 30 Xetra Australia All Ordinaries China/Hong kong descend Seng Singapore Strait Times Malaysia Kuala Lumpur Composite Thailand stock exchange of Thailand China Shanghai