Modelling Stock Returns Volatility

Student: Elesin Vladislav

Educational Programme: Economics (Bachelor)

Year of Graduation: 2021

Modern portfolio theory demonstrates constantly increasing demand for stock returns volatility forecasting. This study explored the process of modelling of volatility of stocks included in S&P 500 index between 2000 and 2020. The main objective of present research is to develop a valid model to forecast volatility aimed at minimizing portfolio risk. Stock returns modelling is implemented via Multi Factor Model (MFM) based on arbitrage pricing theory. The methodology of MFM includes estimation of cross-sectional regressions of fundamental risk factors, testing their statistical significance, configuration of the risk factor set, calculation of their covariance matrix and its practical application in forecasting future volatility of stock returns. The result of the present research is the model that provides significant explanatory power for volatility prediction and the comparison of the estimated portfolio performance with the S&P 500.

Student Theses at HSE must be completed in accordance with the University Rules and regulations specified by each educational programme.

Summaries of all theses must be published and made freely available on the HSE website.

The full text of a thesis can be published in open access on the HSE website only if the authoring student (copyright holder) agrees, or, if the thesis was written by a team of students, if all the co-authors (copyright holders) agree. After a thesis is published on the HSE website, it obtains the status of an online publication.

Student theses are objects of copyright and their use is subject to limitations in accordance with the Russian Federation’s law on intellectual property.

In the event that a thesis is quoted or otherwise used, reference to the author’s name and the source of quotation is required.

Search all student theses