Volatility Analysis and Forecasting of Selected DSE Stocks Using GARCH Models: A Case Study of SPL, IFICB, and KBPWBI
Keywords:
Volatility, Stock Price, DSE, Return, IFICB, KBPWBI, SPLAbstract
This research aims to estimate future volatility patterns of specific companies by evaluating the volatility dynamics of the Dhaka Stock Exchange (DSE) and using GARCH (Generalized Autoregressive Conditional Heteroscedasticity) models in conjunction with other statistical and mathematical methodologies. The research examines daily closing prices from January 2018 to June 2023 for Khan Brothers PP Woven Bag Industries Limited (KBPWBI), IFIC Bank Limited (IFICB), and Square Pharmaceuticals Limited (SPL). Empirical findings reveal non-stationary behavior in the time series distribution of daily returns, exhibiting both positive and negative skewness. High volatility and sharp fluctuations were particularly prominent in IFICB and KBPWBI compared to SPL. The computed standard deviation highlights KBPWBI as the most volatile stock, registering significant price swings with volatility peaking at 4.23% in 2020 and 3.86% in 2021. Conversely, SPL demonstrated a gradual decline in volatility over the past three years, indicating increasing market stability for this firm. Utilizing the EGARCH (Exponential Generalized Autoregressive Conditional Heteroskedasticity) model, the study further explores the return volatility of these three IPOs, projecting volatility trends from June 2023 through December 2025. The results reveal evidence of volatility clustering and asymmetric effects across all stocks. IFICB exhibited the highest volatility levels, whereas SPL maintained the lowest, with a projected volatility spike anticipated for SPL in late 2025. Notably, mid-2024 is forecasted to be the most stable period for all three IPOs, marking a temporary phase of reduced market turbulence.
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