An examination of return and volatility patterns on the Irish equity market

Abstract

This study examines the pattern of returns and volatility on Irish equity markets, over a period when the markets were deregulated. GARCH and GARCH-IN-MEAN models are applied to data from three study periods. Volatility spillovers from the London stock market are considered, providing a test for evidence of a change in the degree of this influence. Within sample results show that GARCH models do provide a useful description of Irish equity returns. Furthermore, the inclusion of external volatility improves the model fit. There is no evidence that deregulation coincides with an alteration in the impact of external volatility. Forecast results indicate some evidence that the inclusion of external volatility spillovers does improve the forecast accuracy of GARCH models. Tests indicate that a GARCH-IN-MEAN specification does not suit Irish equity data.