The volatility of bank stock prices and macroeconomic fundamentals in the Pakistani context: an application of GARCH and EGARCH models

• DOI: 10.24136/oc.2020.025
• Publication Date: 2020-12-30T19:30:50Z
• Authors: Muhammad Mohsin; Li Naiwen; Muhammad Zia-UR-R...; Sobia Naseem; Sajjad Ahmad Baig
• Keywords: Stock (firearms)

Research Background: The banking sector plays a crucial role in the world?s economic development. This research paper evaluates volatility spillover, symmetric, and asymmetric effects between macroeconomic fundamentals, i.e., market risks, interest rates, exchange bank stock returns, for listed banks of Pakistan. Purpose article: main purpose this study is to examine Pakistani returns due influence risk, rates. Pakistan selected because its strongly influential achieving sustainable Methods: By applying OLS with Heteroskedasticity Autocorrelation Consistent (HAC) covariance matrix, GARCH (1, 2), EGARCH 1), analysis conducted period from January 1, 2009 December 31, 2019 using samples 13 banks. Findings & Value added: ARCH parameter significant HAC matrix estimation, which clear indication existence heteroskedasticity squared residuals inaccuracy matrix. results suggest model family accurately measure prices. mean equation 2) 1) indicate positive significance risk low confirming that affect sensitivity compared It should be noted (?) parameters variance fulfill non-negative conditions model. Furthermore, leverage found positively all banks, influenced by shocks negative shocks. Conclusively, it can stated determine dynamics conditional stocks. Nevertheless, rate volatilities returns? volatility.