SECTORIAL VOLATILITY TRANSMISSION IN STOCK MARKET: EMPIRICAL EVIDENCE FROM DOW JONES INDICES

Baber Iqbal , Dr. Ijaz Butt

Abstract

The objective of the study is to examine the existence of the volatility and its perseverance in different indices of Dow Jones and the spillover effect among these indices. For this purpose,
the daily closing prices of the five indices of Dow Jones, have been collected from July 1, 2001 to June 30, 2019. These indices are Consumer goods, Consumer Service, Health Care,
Industrial, and Insurance. In order to estimate the results ARMA (1, 1)/ GARCH (1, 1) model has been used in the study. The results show the existence of volatility in the return of all the
indices and the spillover effect has been observed among all the indices. The persistence of volatility has been calculated and its existence for the longer period of time has also been
observed. The long term relationship among the sectors has been observed by taking the closing values of the each selected sectors.
Key Words: Dow Jones Indices, Volatility, Persistence of Volatility, Spillover Effect, ARMA (1, 1)-GARCH (1, 1)