Modeling the Egyptian Stock Market Volatility Pre- and Post Circuit Breaker

38 Pages Posted: 3 Aug 2004

See all articles by Eskandar A. Tooma

Eskandar A. Tooma

The American University in Cairo - School of Business and Economics

Maged S. Sourial

Egyptian Ministry of Foreign Trade

Abstract

Circuit breakers (price limits and trading halts) are regulatory instruments aiming to reduce severe price volatility and provide markets with a cooling off period. The paper investigated empirically, using daily returns of two Egyptian Stock Market indices the Hermes Financial Index (HFI) and the Egyptian Financial Group Index (EFGI) during the period January 1993 - December 2001, the impact of regulatory policies on conditional volatility estimation. The paper examined four models GARCH, EGARCH, GJR, and APARCH under variety of density functions (Gaussian normal distribution, Student-t distribution, Skewed Student-t and Generalized Exponential Distribution (GED)). The empirical evidence provided in this paper confirms Mecagni and Sourial (1999) findings that the symmetric price limits on individual shares failed to dampen volatility in the market. Furthermore, regulatory and/or structural shifts in the market results in different conditional volatility model structure and using asymmetric models for conditional volatility estimation rather than symmetric models provide better results.

Keywords: Circuit breakers, asymmetric models, conditional volatility

JEL Classification: G12, G14, G18

Suggested Citation

Tooma, Eskandar A. and Sourial, Maged S., Modeling the Egyptian Stock Market Volatility Pre- and Post Circuit Breaker. Available at SSRN: https://ssrn.com/abstract=572061 or http://dx.doi.org/10.2139/ssrn.572061

Eskandar A. Tooma

The American University in Cairo - School of Business and Economics ( email )

P.O. Box 2511
Cairo
Egypt

Maged S. Sourial (Contact Author)

Egyptian Ministry of Foreign Trade ( email )

2, Bahgat Ali St., Masry Towers
Zamalek
Cairo
Egypt
+202 7370381 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
467
rank
58,858
Abstract Views
2,465
PlumX Metrics