Paper Status Tracking

Journals by Title

Journals by Subject

Contact us

	[email protected]
	3275638434

	Paper Publishing WeChat

Useful Links

Creative Commons Attribution-NonCommercial 4.0 International License

Article

Open Access

Vector Autoregressive (VAR) Modeling and Projection of DSE

Author(s)

Ahammad Hossain, Md. Kamruzzaman, Md. Ayub Ali

Full-Text PDF Download XML 21938 Views

DOI:10.17265/1537-1506/2015.06.001

Affiliation(s)

Ahammad Hossain, M.Sc., lecturer, Department of Natural Science, Varendra University, Rajshahi, Bangladesh.
Md. Kamruzzaman, Ph.D., associate professor, Institute of Bangladesh Studies, University of Rajshahi, Rajshahi, Bangladesh.
Md. Ayub Ali, Ph.D., professor, Department of Statistics, University of Rajshahi, Rajshahi, Bangladesh.

ABSTRACT

In this paper, vector autoregressive (VAR) models have been recognized for the selected indicators of Dhaka stock exchange (DSE). Bangladesh uses the micro economic variables, such as stock trade, invested stock capital, stock volume, current market value, and DSE general indexes which have the direct impact on DSE prices. The data were collected for the period from June 2004 to July 2013 as the basis on daily scale. But to get the maximum explorative information and reduction of volatility, the data have been transformed to the monthly scale. The outliers and extreme values of the study variables are detected through box and whisker plot. To detect the unit root property of the study variables, various unit root tests have been applied. The forecast performance of the different VAR models is compared to have the minimum residual. Moreover, the dynamics of this financial market is analyzed through Granger causality and impulse response analysis.

KEYWORDS

vector autoregressive (VAR) model, impulse response analysis, Granger causality

Cite this paper

References

Ainul, I., & Khaled, M. (2005). Tests of weak-form efficiency of the Dhaka stock exchange. Journal of Business Finance & Accounting, 32(7-8), 1613-1624.

Bierens, H. J. (1997). Testing the unit root with drift hypothesis against nonlinear trend stationarity with an application to the U.S. price level and interest rate. Journal of Econometrics, 81, 29-64.

Campbell, J., Lo, A., & MacKinlay, C. (1997). The econometrics of financial markets. Princeton: Princeton University Press.

Chowdhury, S. S. H., Sadique, M. S., & Rahman, M. A. (2001). Capital market seasonality: The case of Dhaka stock exchange (DSE) returns. South Asian Journal of Management, 8, 1-8.

Culbertson, K. (1996). Quantitative financial economics: Stocks, bonds and foreign exchange. New York: John Wiley & Sons.

Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74, 427-431.

Elliott, G., Rothenberg, T. J., & Stock, J. H. (1996). Efficient tests for an autoregressive unit root. Econometrica, 64, 813-836.

Hamilton, J. D. (1994a). Time series analysis. Princeton: Princeton University Press.

Hamilton, J. D. (1994b). State space models. In R. F. Engle and D. L. McFadden (Eds.), Handbook of econometrics. Amsterdam: Elsevier.

Hassan, M. K., & Chowdhury, S. S. H. (2008). Efficiency of Bangladesh stock market: Evidence from monthly index and individual firm data. Applied Financial Economics, 18(9), 749-758.

Islam, M. N. (2011). Problems and prospects of stock market in Bangladesh. Economic Research, 12, 81.

Kader, A. A., & Rahman, M. A. (2005). Testing the weak-form efficiency of an emerging market: Evidence from the Dhaka stock exchange of Bangladesh. AIUB Journal, 4(2), 109-132.

Khababa, N. (1998). Behavior of stock prices in the Saudi Arabian financial market: Empirical research findings. Journal of Financial Management & Analysis, 11(1), 48-55.

Koutmos, G., Negakis, C., & Theodossiou, P. (1993). Stochastic behavior of the Athens stock exchange. Applied Financial Economics, 3, 119-126.

Kwiatkowski, D., Phillips, P. C. B., Schmidt, P., & Shin, Y. (1992). Testing the null hypothesis of stationary against the alternative of a unit root. Journal of Econometrics, 54, 159-178.

Lutkepohl, H. (1991). Introduction to multiple time series analysis. Berlin: Springer-Verlag.

Lutkepohl, H. (1999). Vector autoregressions (Unpublished manuscript, Institutfür Statistik und Ökonometrie, Humboldt-Universitat zu, Berlin).

Mills, T. C. (1999). The econometric modeling of financial time series (2nd ed.). Cambridge: Cambridge University Press.

Mobarek, A., Mollah, S. A., & Bhuyan, R. (2008). Market efficiency in emerging stock market: Evidence from Bangladesh. Journal of Emerging Market Finance, 7(1), 17-41.

Ng, S., & Perron, P. (2001). Lag length selection and the construction of unit root tests with good size and power. Econometrica, 69(6), 1519-1554.

Phillips, P. C. B., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75, 335-346.

Sadique, S., & Chowdhury, S. S. H. (2002). Serial dependence in the Dhaka stock exchange returns: An empirical study. Journal of Bangladesh Studies, 4, 47-57.

Sims, C. A. (1980). Macroeconomics and reality. Econometrica, 48, 1-48.

Tsay, R. S. (2001). Analysis of financial time series. Berlin: Springer-Verlag.

Uddin, M. G. S., & Alam, M. M. (2007). The impacts of interest rate on stock market: Evidence from Dhaka stock exchange. South Asian Journal of Management and Sciences, 1(2), 123-132.

Uddin, M. G. S., & Khoda, N. M. A. K. (2009). An empirical examination of random walk hypothesis for Dhaka stock exchange: Evidence from pharmaceutical sector of Bangladesh. International Research Journal of Finance and Economics, 33, 87-100.

Waggoner, D. F., & Zha, T. (1999). Conditional forecasts in dynamic multivariate models. Review of Economics and Statistics, 81(4), 639-651.

Watson, M. (1994). Vector autoregressions and cointegration. In R. F. Engle and D. MacFadden (Eds.), Handbook of econometrics. Amsterdam: Elsevier Science Ltd.