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Pricing of Risk, Various Volatility Dynamics and Macroeconomic Exposure of Firm Returns: New Evidence on Age Effect

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  • Faisal Khan

    (College of Business, University of Modern Sciences, Dubai, UAE)

  • Saif-Ur-Rehman Khan

    (College of Business, University of Modern Sciences, Dubai, UAE)

  • Hashim Khan

    (COMSATS IIT, Islamabad, Pakistan)

Abstract

While investigating the role of age effect in detecting the risks-return tradeoff, various volatility dynamics and macroeconomic exposure of firm returns, this research study employs monthly data from Pakistani stock market for the period from 1998 to 2012. For this purpose, three generalized autoregressive conditional heteroskedasticity models (GARCH-M) were functioned: GARCH-M for risks-return tradeoff, GARCH (1, 1) for capturing different volatility dynamics and exponential GARCH for asymmetric and leverage effect. This study rests on the following outcomes. Firstly, we unravel that age effect is flag rising in the debate of risks-return tradeoff. Secondly, in the course of exploring whether the firm age matters from the context of asymmetry and leverage effect, we find that it is certainly the case. Thirdly, age effect holds considerable role in determining various volatility dynamics. Finally, we expose that macroeconomic variables affect stock returns differently depending upon firm age, signifying the role of age effect

Suggested Citation

  • Faisal Khan & Saif-Ur-Rehman Khan & Hashim Khan, 2016. "Pricing of Risk, Various Volatility Dynamics and Macroeconomic Exposure of Firm Returns: New Evidence on Age Effect," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 551-561.
    • Handle: RePEc:eco:journ1:2016-02-27
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    3. Sharif Ullah Jan & Hashim Khan, 2018. "Return Volatility and Macroeconomic Factors: A Comparison of US and Pakistani Firms," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 10(2), pages 1-28, June.

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    More about this item

    Keywords

    Firm Age; Risks-Return Trade-off; Volatility Dynamic and Macroeconomic Exposure;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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