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This study aims to investigate the volatility between Conventional and Islamic stock market by deploying Autoregressive Conditional Heteroskedastic (ARCH) model and Generalized ARCH (GARCH) models along with their variants, Power ARCH (PARCH), Threshold ARCH (TARCH) and Exponential GARCH (EGARCH) on comparable stock market index. Karachi Stock Exchange 30 index (KSE-30) was cross examined with the volatility of KSE Meezan Index (KMI-30) and Dow Jones Islamic Market Index (DJIMI) with Dow Jones Industrial Average (DJIA) to determine the existence of correlation and impact in the volatility of indices. Time effect is being analyzed in the study where the response time to external factors of growing Islamic Market Index is compared to that of a mature Conventional Market Index by applying lags and testifying the ARCH effect on the stationary data, arrived through Augmented Dickey Fuller test, including daily closing prices from 2012 to 2016. The results assess the most appropriate model for each index to be applied for the purpose of forecasting on the basis of volatility. It also established the relationship between comparable index volatility with identifying common denoting factor either the type of the index, that is, Islamic and Conventional or the Geographical Boundaries of the index.

Farhan Ahmed, Iqra Awais, Dr. Anjum Pervaiz. (2016) Modeling Volatility for Conventional and Islamic Stock Market Indices, Journal of Independent Studies and Research-Management, Social Sciences and Economics, Volume-14, Issue-1.
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