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n Studies in Economics and Econometrics - The persistence of SA equity volatility : a component arch perspective

Volume 31, Issue 1
  • ISSN : 0379-6205

Abstract

This paper investigates the conditional volatilities of equity returns on the JSE for both the broad ALSI40 index and its various subsectors. Using a Component ARCH (CARCH) model the paper disaggregates the conditional volatilities of the equities into three distinct components: a time-invariable mean, a long-run (Permanent) dynamic and a short-run (Transitory) dynamic. Significant evidence of volatility persistence is found over both the long-run and the short-run for each series and for the broad index. The half-lives of such persistence for the broad ALSI is found to be 5.60 trading days for the short-run dynamics and 169 trading days for the long-run dynamics; these estimated short-run and long-run half-lives are found to vary greatly amongst the sectors. The long-run time-invariable underlying magnitude of equity returns volatility for the ALSI40 index is estimated at 1.45% per trading day, though again much heterogeneity is found amongst the various individual sectors under investigation.

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/content/bersee/31/1/EJC21438
2007-04-01
2019-10-16

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