ABSTRACT

Increasing trading volume and developing new investments raise the importance of financial analysis in recent years. Analysis of volatility has a particular importance and classical GARCH models are widely used for this aim. Bayes Theorem is a very old theorem that takes part in statistical literature and the Bayesian Approach, which based on this theorem are applied in several areas for many years. GARCH models can be developed via Bayesian Approach in order to explain volatility better. In this study, the classical and bayesian GARCH models are estimated and compared for the stock return volatility of Istanbul Stock Exchange. The aim of this study is to research which models explain stock return volatility better. In contrast to classical GARCH models, the bayesian GARCH models give significant results for stock return volatility.