Financial Crisis and Stock Return Volatility of the JSE General Mining Index: GARCH Modelling Approach

  • Paul-Francois Muzindutsi University of KwaZulu-Natal
  • Adefemi A. Obalade University of KwaZulu-Natal
  • Rugiranka Tony Gaston University of KwaZulu-Natal
Keywords: Financial crisis, GARCH models; JSE; mining index; risk-return; volatility


The aim of this article is to model the return volatility of the JSE mining sector and analyse
how changes in the return volatility were affected by the 2008 financial crisis. The GARCH,
EGARCH and GJR-GARCH are estimated in mean with the Student’s t-distribution. To account for
the 2008 financial crisis, the sample period, which included daily stock index returns from July 1995
to June 2018, was divided into three sub-periods. From the results, the best-fit model for the three
sub-periods was found to be GJR-GARCH (1, 1). The results revealed that the level of volatility
varies across the three sub-periods with the highest reported pre-crisis and the lowest volatility during
crisis. This article found that the level of volatility decreased significantly during crisis, but began to
rise after the crisis, although not rising to the pre-crisis level. This implies that the crisis increased the
mining investors’ risk aversion. Fundamentally, the magnitude of the volatility is not similar across
three sub-periods. Such variation suggested different reactions of investors to new information. The
fluctuation in volatility proved that the 2008 financial crisis affected JSE mining investors’ attitudes
towards overall risk.


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date: 09.18.2011