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The New Market effect on return and volatility of Spanish stock indexes

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  • Juan Angel Lafuente
  • Jesus Ruiz

Abstract

Recently (April 2000), the New Market index began to be computed in the Spanish Stock Exchange as a relevant indicator of the new technological firms' behaviour in the Spanish economy. This paper provides empirical evidence about the relationships between the return and volatility of Spanish sector indexes and the New Market index volatility. Using GARCH methodology, empirical results reveal a positive significant impact on the financial, industrial and utilities sector volatility, that is, high volatility in New Market tends to increase volatility in the other sectors. On the other hand, only a statistical effect is detected on returns of the industrial sector, suggesting that only this sector require a risk premium when shocks in the technological sector increase the global market risk.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100410001692828
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 14 (2004)
Issue (Month): 18 ()
Pages: 1343-1350

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Handle: RePEc:taf:apfiec:v:14:y:2004:i:18:p:1343-1350

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  1. Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993. "On the relation between the expected value and the volatility of the nominal excess return on stocks," Staff Report 157, Federal Reserve Bank of Minneapolis.
  2. Robert F. Engle & Victor K. Ng, 1991. "Measuring and Testing the Impact of News on Volatility," NBER Working Papers 3681, National Bureau of Economic Research, Inc.
  3. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 369-80, October.
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