Have European Stocks Become More Volatile? An Empirical Investigation of Volatilities and Correlations in Emu Equity Markets at the Firm, Industry and Market Level PDF Download
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Author: Colm Kearney Publisher: ISBN: Category : Languages : en Pages : 35
Book Description
We examine the dynamics of idiosyncratic risk, market risk and return correlations in European equity markets using weekly observations from 3515 stocks listed in the Euro-area stock markets in the period 1974-2004. Similarly to Campbell, Lettau, Malkiel and Xu (2001), we find an increase in idiosyncratic volatility, implying that it now takes more stocks to diversify away idiosyncratic risk. Contrary to their findings, however, market risk is trended upwards and correlations among the stocks are only mildly trended downwards. Market volatility tends to lead the other volatility measures in EMU markets whereas idiosyncratic volatility leads in the US ones. Both the volatility and the correlation measures increase at times of low market returns implying a skewed market portfolio return distribution. We suggest a number of implications of these findings for portfolio management, trading and asset pricing.
Author: Colm Kearney Publisher: ISBN: Category : Languages : en Pages : 35
Book Description
We examine the dynamics of idiosyncratic risk, market risk and return correlations in European equity markets using weekly observations from 3515 stocks listed in the Euro-area stock markets in the period 1974-2004. Similarly to Campbell, Lettau, Malkiel and Xu (2001), we find an increase in idiosyncratic volatility, implying that it now takes more stocks to diversify away idiosyncratic risk. Contrary to their findings, however, market risk is trended upwards and correlations among the stocks are only mildly trended downwards. Market volatility tends to lead the other volatility measures in EMU markets whereas idiosyncratic volatility leads in the US ones. Both the volatility and the correlation measures increase at times of low market returns implying a skewed market portfolio return distribution. We suggest a number of implications of these findings for portfolio management, trading and asset pricing.
Author: N. Finch Publisher: Springer ISBN: 1137450665 Category : Business & Economics Languages : en Pages : 438
Book Description
Emerging Markets and Sovereign Risk provides case studies, commentary and analysis on the financial risk management and measurement in the context of frontier and developing counties from international experts covering three key areas of emerging market investments, the rating sovereign risk and managing sovereign risk.
Author: Mohammed El Hedi Arouri Publisher: Academic Press ISBN: 0124115632 Category : Business & Economics Languages : en Pages : 927
Book Description
Emerging Markets and the Global Economy investigates analytical techniques suited to emerging market economies, which are typically prone to policy shocks. Despite the large body of emerging market finance literature, their underlying dynamics and interactions with other economies remain challenging and mysterious because standard financial models measure them imprecisely. Describing the linkages between emerging and developed markets, this collection systematically explores several crucial issues in asset valuation and risk management. Contributors present new theoretical constructions and empirical methods for handling cross-country volatility and sudden regime shifts. Usually attractive for investors because of the superior growth they can deliver, emerging markets can have a low correlation with developed markets. This collection advances your knowledge about their inherent characteristics. Foreword by Ali M. Kutan - Concentrates on post-crisis roles of emerging markets in the global economy - Reports on key theoretical and technical developments in emerging financial markets - Forecasts future developments in linkages among developed and emerging economies
Author: Miguel A. Ferreira Publisher: ISBN: Category : Languages : en Pages : 42
Book Description
This paper uses a volatility decomposition method to study the time series behavior of equity volatility at the world, country and local industry levels. Between 1974 and 2001 there is no noticeable long-term trend in any of the volatility measures. Then in the 1990s, there is a sharp increase in local industry volatility compared to market and country volatility. Thus, correlations among local industries have declined. More assets are needed to achieve a given level of diversification, and there is more of a penalty for not being well diversified by industry. Local industry volatility leads the other volatility measures.
Author: Geert Bekaert Publisher: ISBN: Category : Investments Languages : en Pages : 72
Book Description
It appears that volatility in equity markets is asymmetric: returns and conditional volatility are negatively correlated. We provide a unified framework to simultaneously investigate asymmetric volatility at the firm and the market level and to examine two potential explanations of the asymmetry: leverage effects and time-varying risk premiums. Our empirical application uses the market portfolio and portfolios with different leverage constructed from Nikkei 225 stocks, extending the empirical evidence on asymmetry to Japanese stocks. Although volatility asymmetry is present and significant at the market and the portfolio levels, its source differs across portfolios. We find that it is important to include leverage ratios in the volatility dynamics but that their economic effects are mostly dwarfed by the volatility feedback mechanism. Volatility feedback is enhanced by a phenomenon that we term covariance asymmetry: conditional covariances with the market increase only significantly following negative market news. We do not find significant asymmetries in conditional betas.
Author: Publisher: ISBN: Category : Languages : en Pages : 159
Book Description
Firm-level stock volatility has increased significantly since 1962 and varies widely across industries. Recent literature shows that the excessive and persistent stock volatility can be well explained by fundamental uncertainties. This paper conducted panel data analyses on 415 firms during 1988-2001 in an effort to study the extent to which variation of individual stock returns can be explained by fundamental uncertainties. Mainly, we examined the uncertainty effects of demand shifts and a firm's innovative activities as well as other firm and industry characteristic variables on firm level idiosyncratic stock volatility. The results from the panel data analyses suggest that R & D intensive firms or firms in high-tech industries have more volatile returns. Idiosyncratic volatility is higher when there is greater demand uncertainty. Data also support the prediction that idiosyncratic volatility is higher for small firms and a firm with higher volatility of profitability. In addition, we find some evidence that idiosyncratic volatility increases with variation in analysts' earnings forecasts used as a proxy for changes in expectations that are associated with uncertainty and heterogeneous belief. Trading volume, which is used as a control variable for the information arrival, is found to endogenously increase idiosyncratic volatility. Furthermore, a firm's leverage is observed to have a significant and positive effect on idiosyncratic volatility in our whole panel data sample as well as the down market sample. However, we also observed a reverse leverage effect in the upward market sample. Finally, various empirical tests suggest that the idiosyncratic volatilities are persistent.
Author: Eugenie M.J.H. Hol Publisher: Springer ISBN: 9781441953759 Category : Business & Economics Languages : en Pages : 0
Book Description
Empirical Studies on Volatility in International Stock Markets describes the existing techniques for the measurement and estimation of volatility in international stock markets with emphasis on the SV model and its empirical application. Eugenie Hol develops various extensions of the SV model, which allow for additional variables in both the mean and the variance equation. In addition, the forecasting performance of SV models is compared not only to that of the well-established GARCH model but also to implied volatility and so-called realised volatility models which are based on intraday volatility measures. The intended readers are financial professionals who seek to obtain more accurate volatility forecasts and wish to gain insight about state-of-the-art volatility modelling techniques and their empirical value, and academic researchers and students who are interested in financial market volatility and want to obtain an updated overview of the various methods available in this area.
Author: Sartaj Hussain Publisher: ISBN: Category : Languages : en Pages : 14
Book Description
This study aims to gain insights on various issues that surround stock market volatility. For this purpose, more than forty empirical studies have been examined to critically assess issues like, heteroscedasticity, asymmetric effect, risk-return framework, spillovers and forecasting accuracy. With the help of time-series plots, the study demonstrates in layman terms how mean-reversion, clustering and heteroscedasticty exhibits in stock market volatility. This study finds GARCH variants to have a wider applicability in the modelling of volatility persistence despite fearing poorly in evaluation against naive methods like realised volatility, EWMA. The asymmetric effect doesn't seem to be as strong at firm level as it appears at the broad market index level. Evidence of statistically weak relation between conditional volatility and expected returns raises questions about accuracy of the volatility measures plugged for testing the relation. In case of spillover effects, immunity/propensity of a market to face/generate systemic shocks from/to other markets is likely to be determined by level of market development. On the whole, empirical findings lack a general consensus on the volatility properties. This may be due to sensitivity of different findings to the models and frequency and time length of sample data used by the study.
Author: Colm Kearney
Author: Colm Kearney
Author: N. Finch
Author: Mohammed El Hedi Arouri
Author: Miguel A. Ferreira
Author: Thomas Kraus
Author: Geert Bekaert
Author: 
Author: Eugenie M.J.H. Hol
Author: Vitor Gaspar
Author: Sartaj Hussain