ANALYSIS OF STOCK RETURN VOLATILITIES USING CLASSICAL AND BAYESIAN STOCHASTIC VOLATILITY MODELS IN DEVELOPED AND EMERGING MARKETS.

The aim of this study is to estimate and compare the classical and Bayesian stochastic volatility models for stock returns of developed and developing 10 countries. For the reason that financial series have fat-tails in the conditional distribution Bayesian stochastic volatility models with fat-tailed residuals in the mean equation, asymmetric Bayesian stochastic volatility models that allow leverage effect via correlation between the volatility and mean equation residual and Bayesian stochastic volatility models that allow both leverage effect and fat-tailed residuals are also estimated. In general when examining the results of the models it is seen that Bayesian models give better results for all indexes.