The effects of the 2008 financial crisis in the Philippine Stock Exchange from 2006-2015: Modelling stock market volatility using sector indices with an application of Garch, Egarch, and Tgarch models

• Main Author: Francia, Nina Luz V.
• Format: text
• Language: English
• Published: Animo Repository 2016
• Subjects: Financial crises > Philippines; Stock exchanges > Philippines; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/2689
• Institution: De La Salle University

This paper examines sector specific volatility in order to determine how different sectors respond to volatility shocks within the same equity market. The Philippine Stock exchange (PSE) Index Series, composed of the PSEI Index and sector indices, is utilized for this study. Volatility is modeled using GARCH, EGARCH and TGARCH in order to examine the temporal volatility dynamics of each specific industry. Stylized facts such as volatility clustering, long memory and the leverage effect are investigated for each sector. Furthermore, the data is divided into three periods. The first period includes index data prior to the 2008 Financial Crisis, the second period includes index data during the period of Financial Crisis, and the third period includes index data after the 2008 Financial Crisis. The findings indicate that EGARCH is the preferred model providing successful model specification for all sector indices for all periods. Although the stylized facts were apparent for most sectors for all periods, there was strong evidence of heterogeneous response of sector volatility due to the exogenous shocks of the financial crisis.