A COMPARATIVE ANALYSIS BETWEEN THE NIKKEI 225 AND THE TOPIX INDICES, THE MOST IMPORTANT STOCK MARKET INDICES FOR THE TOKYO STOCK EXCHANGE

Petrica, A.
Abstract:
The purpose of the research is to compare the main two important stock market indices for the Tokyo Stock Exchange: the Nikkei Stock Average Index (NIKKEI 225) and the Tokyo Stock Price Index (TOPIX), both from the composition, calculation methodology and base value, but also taking into account the changes in volatility using the asymmetric Generalized Autoregressive Conditionally Heteroscedastic processes. The paper tracks the application of time series analysis in financial markets. To do this, I chose the Tokyo Stock Exchange because it is the largest stock exchange in Japan, and together with the London Stock Exchange and the New-York Stock Exchange gives the most important international indices. Since the area of empirical research in financial markets has become a very important topic over the last few decades, the importance of this paper is given not only by the central concept in financial analysis represented by volatility measured as conditional variance, which is not directly observable, but also by the most delicate field of econometrics represented by time series. Generally, an index is both a statistical indicator that reflects market evolution over time, but also a benchmark reflecting the asset management performance. So, stock price indices have become indispensable in the investment decisions field. It comes as no surprise that the analyzed indices have their advantages and disadvantages, since the calculation methods have a distinct approach regarding the stock market capitalization, fact that leads to the choice of TOPIX Index in Japanese asset management instead of NIKKEI 225 Index. As respects volatility, the empirical results show that in both cases the best process for estimating volatility is EGARCH(1,1), but the distributions are different (for NIKKEI 225 - the Student’s t distribution with fixed degrees of freedom, while for TOPIX - GED with fixed parameter).
SGEM Research areas:
Year:
2017
Type of Publication:
In Proceedings
Keywords:
Time Series Analysis; Volatility; Leverage Effect; Financial Markets; Stock Market Capitalization.
Volume:
17
SGEM Book title:
4th International Multidisciplinary Scientific Conference on Social Sciences and Arts SGEM 2017
Book number:
3
SGEM Series:
International Multidisciplinary Scientific Conference on Social Sciences and Arts-SGEM
Pages:
3-10
Publisher address:
51 Alexander Malinov blvd, Sofia, 1712, Bulgaria
SGEM supporters:
Bulgarian Acad Sci; Acad Sci Czech Republ; Latvian Acad Sci; Polish Acad Sci; Russian Acad Sci; Serbian Acad Sci & Arts; Slovak Acad Sci; Natl Acad Sci Ukraine; Natl Acad Sci Armenia; Sci Council Japan; World Acad Sci; European Acad Sci, Arts & Letters; Ac
Period:
24 - 30 August 2017
ISBN:
978-619-7408-15-7
ISSN:
2367-5659
Conference:
4th International Multidisciplinary Scientific Conference on Social Sciences and Arts SGEM 2017, 24 - 30 August 2017
DOI:
10.5593/sgemsocial2017/13/S03.001
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