Stock Price Volatility: An Empirical Investigation of Some Selected Securities in the Chittagong Stock Exchange

Abstract

This paper examines the volatility of share prices and potential asymmetric
effect of good and bad news on volatility in the stock market of Bangladesh.
Using 2,615 daily observations on share prices of six commercial banks
each, of the period from December 2011 to January 2021, we examine the
existence of ARCH effect and then estimate ARCH model. GARCH model
has been estimated and found more suitable for modeling and forecasting
the volatility in share market. In order to examine whether bad news in the
share market causes more turbulence, we have estimated the Threshold
GARCH model. Estimation outputs of TGARCH model do not provide any
evidence of asymmetry in the impact of good or bad news on share prices
because the threshold dummy of the estimated TGARCH model is found
insignificant for all banks’ share prices. The findings of our research have
important implication for the investors seeking portfolio investment as well
as for the financial market analysts.