Modeling Stock Market Volatility Using GARCH Approach on the Ghana Stock Exchange
The study examined and modeled stock market volatility of financial return series for three listed equities on the Ghana Stock Exchange (GSE). A historical data from 25th June 2007 to 31st October 2014 was considered for the analysis. The series for each of the three equities were tested for stationarity using the KPSS test. Series found to be non-stationary were transformed to be stationary. The study fitted a GARCH (p, q) model for volatility. GARCH (1, 1), GARCH (1, 2), GARCH (2, 1) and the GARCH (2, 2) models were fitted to residual series of some three equities. Results revealed the presence of volatilities in all three equities and also showed that volatility though present was not persistent in the three equities. For each of the companies under study, the GARCH (1, 1) model was found to outperform the other three models based on the comparison of the AICc for each model. The study recommended the use and comparison of other variants of the GARCH model in estimation of volatility.