Relationship Between Stock Returns And Volatility Using Symmetric And Asymmetric Models Of The Garch Family

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This paper examines the relationship between stock returns and volatility using symmetric and asymmetric models of the GARCH family. For testing this relationship a time series sample of FTSE100 price index starting from 1st January 1988 to 31st December 2014 was taken. For calculating the excess returns on the stock index the risk free rate used is 3 months UKGBILL corresponding to the same time span.
This sample was chosen based on the
The summary statistics used which explains the statistical properties of the data are mean, median, standard deviation, skewness, kurtosis and test for normal distribution of the data. The mean and the median measure the central tendency of the financial data which shows the location or the clustering of the data around a certain central value. The standard deviation measures the dispersion of the data from this central value and the strength of the central tendency can therefore be judged based on the standard deviation. The skewness measures the asymmetry of the probability distribution of the data about its mean. Kurtosis is measure of the ‘peakedness’ or the shape of the probability distribution of the data. A high kurtosis distribution has a sharper peak and fatter tails, while a low kurtosis distribution has a more rounded peak and thinner tails. The normal distribution is a function which helps to find the probability that an observation will fall between any two real limits or real numbers.

For the FTSE the average price is
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