Modeling Returns Volatility of Selected Pharmaceutical Companies Listed in DSE of Bangladesh with GARCH Methods

Abstract

The main aim of this study is the empirical exploration for the proper volatility models of some selected pharmaceutical companies listed in the DSE, Bangladesh e.g. Square, Beximco, Beacon, IBN SINA, and Orion Pharmaceuticals Ltd. The data covers the 667 days daily log returns calculated based on closing prices of these five selected companies from 28th January 2019 to 30th December 2021. The beginning portion of the analysis contains the stylized facts of the sampled companies. Afterward, by employing both symmetric along with asymmetric GARCH models different best-fitted models for different pharmaceuticals companies were found. Based on our model selection criteria AIC, SBIC, Log-Likelihood, as well as residual diagnostics GARCH(1,1) is considered to be more appropriate models for both Square Pharmaceuticals Ltd., and Beacon Pharmaceuticals Ltd. The EGARCH (1,1) is deemed to be best for both IBN SINA and Orion Pharmaceuticals Ltd. Whereas, anyone of the GARCH(1,1), and TGARCH(1,) can be applied for the volatility estimation of Beximco Pharmaceuticals Ltd.