Page 4 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.75, # 2, 2018, pp. 4-16

Anamolous Behavior of the Volatility of Nasdaq Composite Index:
1971 To 2017

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Shaikh A. Hamid , Tej S. Dhakar

1 Ph.D., School of Business, Southern New Hampshire University, 2500 North River
Road, Manchester, NH 03106-1045, phone 603-644-3198, Email:s.hamid@snhu.edu
2 Ph.D., School of Business, Southern New Hampshire University, 2500 North River
Road, Manchester, NH 03106-1045,phone 603-644-3106, Email: t.dhakar@snhu.edu

Received 20 September 2018; accepted 20 December 2018; published online 28 December 2018

ABSTRACT

This study explores the seasonality in the volatility of the Nasdaq Composite index.
The study seeks to uncover the anomalies in the behavior of Nasdaq Composite Index
in terms of volatility. We define volatility as the mean of absolute daily percentage
changes in Nasdaq Composite Index over each month. The Mean Absolute Percentage
Change (MAPC) is preferred over the standard deviation of daily percentage changes
during the month as a measure of volatility. The study spans the entire period that
Nasdaq Composite Index has been in existence until the end of last year - from the
inception in February 1971 to December 2017. The study identifies the months when
the volatility is high and the months when Nasdaq Composite is the least volatile. The
period of study is further split into three parts: 1971-1992, 1993-2002 and 2003-2017
to study how the volatility has changed over those three seminal periods since the
inception of Nasdaq Composite Index. It appears that the NASDAQ market has not
become more volatile in recent times. The market appears to be fairly efficient –
though not highly. Also, seasonality changes over time which is the characteristic of
stock markets that are nonstationary. Seasonality is not so pronounced in terms of
mean of absolute changes but more so in terms of volatility of the absolute changes,
as a market consisting of tech-stocks and smaller stocks should be. The findings and
conclusions of the study will be of interest to those who invest in the stock markets,
those who study the behavior of the stock markets, and to economics and finance
professionals in general.

Keywords: Nasdaq Composite Index, NASDAQ Market, Anamolous Behavior,
Volatility, Stock Markets.

JEL Classification: G15

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