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Model-based Measures of Output Gap: Application to the Thai Economy

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  • Pithak Srisuksai

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    (Doctor of Philosophy Program in Economics, School of Economics, University of the Thai Chamber of Commerce, Bangkok, Thailand)

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    Abstract

    This paper demonstrates the finding that time-varying expected idiosyncratic volatility has a significant and positive effect on expected stock returns for individual stocks as well as stock sectors. The positive relation remains after controlling for liquidity variables. The second finding is that time-varying expected market volatility has a significant effect on expected stock returns for both individual stocks and stock sectors, which is consistent with the traditional capital asset pricing model. Although the models control for liquidity variables, the significantly positive relation still exists. In addition, expected idiosyncratic volatility plays a more important role than expected market volatility in determining expected stock returns in the case of individual stocks. In contrast, expected market volatility plays a more important role than expected idiosyncratic volatility in the case of stock sectors.

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    File URL: http://www.journal.eco.ku.ac.th/upload/document/eng/20121235104335.pdf
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    Bibliographic Info

    Article provided by Kasetsart University, Faculty of Economics, Center for Applied Economic Research in its journal Applied Economics Journal.

    Volume (Year): 19 (2012)
    Issue (Month): 2 (December)
    Pages: 66-89

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    Handle: RePEc:aej:apecjn:v:19:y:2012:i:2:p:66-89

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    Related research

    Keywords: idiosyncratic volatility; market volatility; liquidity; expected stock return;

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    References

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