Stock Market Volatility in the Post Recession – A Study on Extreme Volatility Estimators

Abstract

Volatility is the measure of risk associated with the financial instruments. Volatility of a financial instrument can be understood either by using historical volatility measures or by using implied volatility measures. In the present study NSE-NIFTY listed stocks are selected for the purpose of understanding the volatility of select stocks in the post-recession period, using historical volatility estimators. Nearly 25 stocks are selected from NSE-NIFTY on a random basis for a period of five years i.e. 2009-2014 on a daily basis. Historical volatility levels of these companies are computed using classical, range-based and drift independent volatility measures. The volatility was analyzed using extreme value volatility estimators namely, Garman Klass estimator, the Parkinson estimator, the Rogers Satchell estimator and the Yang and Zhang estimator. One of the major finding in the study that recession affected the financial markets in the year 2008, but more deviations in the stock prices are observed in the year 2010, during recovery stage of recession, it may be due to the ambiguity presented in the financial markets across the world. The study also observed that stocks like Bharati Airtel, HCL Technologies, Ruchi Soya Industries, Reliance Communication and Union Bank of India exhibited high volatility during the study period, whereas the stocks like TCS, Infosys and HDFC are stagnant during the study period