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Modelling of volatility of stock prices using GARCH models & its importance in portfolio construction
Includes bibliographical references (leaves 93-96).
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| Other Authors: | |
| Format: | Thesis |
| Language: | English |
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Department of Mathematics and Applied Mathematics
2014
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| _version_ | 1867613261541670912 |
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| access_status_str | Open Access |
| author | Mtemeri, Tinotenda |
| author2 | Guo, Renkuan |
| author_browse | Guo, Renkuan Mtemeri, Tinotenda |
| author_facet | Guo, Renkuan Mtemeri, Tinotenda |
| author_sort | Mtemeri, Tinotenda |
| collection | Thesis |
| description | Includes bibliographical references (leaves 93-96). |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/8958 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:33:19.547Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2014 |
| publishDateRange | 2014 |
| publishDateSort | 2014 |
| publisher | Department of Mathematics and Applied Mathematics |
| publisherStr | Department of Mathematics and Applied Mathematics |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/8958 Modelling of volatility of stock prices using GARCH models & its importance in portfolio construction Mtemeri, Tinotenda Guo, Renkuan Financial Mathematics Includes bibliographical references (leaves 93-96). This thesis is aimed at investigating the possibility to model the risk of stocks in financial markets and evaluating the adequacy and effectiveness of univariate GARCH models such as the symmetric GARCH and a few other variations such as the EGARCH, TARCH and PARCH in modelling volatility in monthly returns of stocks traded on the Johannesburg Stock Exchange. This is further used to investigate the importance of GARCH modelling in portfolio construction using Improved Sharpe Single Index Models. The data used for model estimation has been randomly selected from different sectors of the South African economy. GARCH models are estimated and validated for the data series of the randomly selected 15 JSE stocks. Conclusions are drawn regarding the different GARCH models, best lag structure and best error distributions for modelling. The GARCH (1,1) model demonstrates a relatively good forecasting performance as far as the short term forecasting horizon is concerned. However, the use of alternatives to the more common GARCH (1,1) and use of non-normal distributions is not clearly supported. Also, the use of higher order GARCH models such as the GARCH (1,2), GARCH (2,1) and GARCH (2,2) is not clearly supported and the GARCH (1, 1) remains superior overall to these models. The results obtained from this thesis are of paramount importance in portfolio construction, option pricing and formulating hedging strategies. An illustration of the importance of the G ARCH (1,1) model in portfolio construction is given and conclusions are drawn regarding its usefulness in improving our volatility estimations for purposes of portfolio construction. 2014-10-30T13:49:13Z 2014-10-30T13:49:13Z 2009 Master Thesis Masters MSc http://hdl.handle.net/11427/8958 eng application/pdf Department of Mathematics and Applied Mathematics Faculty of Science University of Cape Town |
| spellingShingle | Financial Mathematics Mtemeri, Tinotenda Modelling of volatility of stock prices using GARCH models & its importance in portfolio construction |
| thesis_degree_str | Master's |
| title | Modelling of volatility of stock prices using GARCH models & its importance in portfolio construction |
| title_full | Modelling of volatility of stock prices using GARCH models & its importance in portfolio construction |
| title_fullStr | Modelling of volatility of stock prices using GARCH models & its importance in portfolio construction |
| title_full_unstemmed | Modelling of volatility of stock prices using GARCH models & its importance in portfolio construction |
| title_short | Modelling of volatility of stock prices using GARCH models & its importance in portfolio construction |
| title_sort | modelling of volatility of stock prices using garch models its importance in portfolio construction |
| topic | Financial Mathematics |
| url | http://hdl.handle.net/11427/8958 |
| work_keys_str_mv | AT mtemeritinotenda modellingofvolatilityofstockpricesusinggarchmodelsitsimportanceinportfolioconstruction |