This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
College of Service Business , Sokolac - East Sarajevo , Bosnia and Herzegovina
College of Service Business , Sokolac - East Sarajevo , Bosnia and Herzegovina
Taking into account the current trends in the financial markets and the crisis caused by the COVID-19 virus, the paper analyzes, tests and quantifies the impact of inflation rates on daily rates of return-on-investment activities in the financial markets of Serbia and Republic of Srpska. The aim of the research is a concrete, practically tested and quantified knowledge about the possibilities and efficiency of the ARCH and GARCH models’ application to quantify the inflation rate impact on the share returns of the observed financial markets. The period covered by the survey is from 2017 to 2021, where it is possible to test the success of the application of ARCH and GARCH methodology in the period before the COVID-19 crisis, as well as during the crisis. The research methodology includes the use of AIC and SIC (Akaike and Schwarz) criteria for selecting optimal models, as well as certain tests that are adapted to the specifics of financial markets in developing countries. The research results confirm the role and significance of the application of econometric models in order to quantify inflation rates to returns return on investment activities in the observed financial markets. The obtained research results will be useful both to the academic community for further research in the field, and to the professional investors in the context of making decisions on investment activities.
inflation rate, returns on financial markets, ARCH and GARCH models, COVID- 19 crisis, risk, investment
The statements, opinions and data contained in the journal are solely those of the individual authors and contributors and not of the publisher and the editor(s). We stay neutral with regard to jurisdictional claims in published maps and institutional affiliations.
