Differences of volatility behavior in sectorial indices: empirical evidence from the Baltic market

Abstract

Though the analysis of volatility in stock returns has a rich history, the focus in academic literature is usually being paid to the general stock market indices or individual company’s returns missing more discussions on differences of sectorial indices. This research considers volatility behavior using various tests and modeling techniques in order to find distinctions between sectorial indices of the Baltics. The results suggest that though the sectorial indices contain several, common for financial data, features, at the same time, the differences of characteristics and sensitivity to previous crisis are found to be significant. The findings are useful not only for theoretical features of financial data, but also for practitioners who set sectorial limits for their portfolios (loans, investments, etc.).