Review: Price and Volatility Estimation models with a special reference to ARMA-GARCH Model in equity market

Abstract

The estimation of future prices based on historical data is quite natural in today’s world. However, for accurate estimation of future price it is important to understand price volatility. Thus, this issue leads to development of many models for estimation of price volatility and at the end short-term forecasting of price. This conceptual paper tries to cover different model of price and volatility estimation namely: MAModel, AR- Model, ARIMA- Model, ARMA- Model, ARCH- Model, GARCH- Model, EWMA- Model (Specific case of GARCH (1, 1)), EGARCH- Model, and mixture of AR-GARCH Model and at last mixture of ARMA- GARCH- Model. Each model is developed in such way that gives results more near to practical situation. However, they always have some basic assumptions and limitation in practical situation. In present study, based on literature survey it’s tried to identify that is ARMA-GARCH model works for price and volatility estimation in equity market or required some more strong model of estimation.