(Volatility Analysis of Bank Stocks Traded on Bourse Istanbul)

Abstract

Purpose – Volatility is important due to its significant impact on decision making in finance sector. This paper aimed to reveal the time-variation characteristics of the volatility of selected bank stocks traded in Borsa Istanbul. Design/methodology/approach – This paper employs daily data of Bist100 index (XU100) and the stocks of 11 selected banks traded in Borsa Istanbul for the period between 2002-2019. The daily data were obtained from Bourse Istanbul and analyzed in the eviews econometric analysis software. The daily volatility of the selected shares was calculated by using a twenty-day rolling estimation window. In this study, EGARCH (1,1) -M model presented by Nelson (1991) was used. Findings – Findings provide evidence that the volatility of selected stocks was high across time and showed significant differences from bank to bank. According to the results, the estimated conditional standard deviation has a positive effect on the conditional returns of only 3 banks, however for the remaining 8 banks analyzed, the conditional standard deviation has a negative effect on the conditional mean. The findings obtained when looking at whether there is any asymmetry in the conditional volatility of the individual stock returns are compatible with Black's (1976) leverage effect where the asymmetric coefficients turn out to be negative. Discussion – The results obtained in this study are statistically significant and reveal the asymmetric effect. The volatility of twenty-day rolling average fluctuates over a wide range. The results contributes to financial asset management and risk management.