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Stock Returns and Volatility

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  • Benjamin Miranda Tabak
  • Solange Maria Guerra

Abstract

This paper examines the relationship between stock returns and volatility over the period of June 1990 to April 2002. We study firm-level relationship between stock returns and volatility for a sample of 25 time series for Brazilian stocks. Using Seemingly Unrelated Regressions (SUR) empirical evidence suggests that contemporaneous returns and volatilities are significantly and positively correlated while there is a negative relationship between changes in volatility and stock returns. Finally, the "leverage effect" seems to hold for Brazilian stocks as shown by the results from an AR (1)-EGARCH (1,1) estimation.

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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps54.pdf
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Bibliographic Info

Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 54.

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Date of creation: Nov 2002
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Handle: RePEc:bcb:wpaper:54

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Web page: http://www.bcb.gov.br/?english

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References

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  1. Bonomo, M. A. & Brito, R.D., 2001. "Regras Monetárias e Dinâmica Macroeconomica no Brasil: uma abordagem de expectativas racionais," Insper Working Papers wpe_11, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  2. Paulo Coutinho & Benjamin Miranda Tabak, 2001. "Decentralized Portfolio Management," Working Papers Series 22, Central Bank of Brazil, Research Department.
  3. Emanuel-Werner Kohlscheen, 2000. "Estimating Exchange Market Pressure and Intervention Activity," Working Papers Series 9, Central Bank of Brazil, Research Department.
  4. Mauro Costa Miranda, 2001. "Crises Cambiais e Ataques Especulativos no Brasil," Working Papers Series 32, Central Bank of Brazil, Research Department.
  5. Pedro H. Albuquerque, 2001. "Os Impactos Econômicos da CPMF: Teoria e Evidência," Anais do XXIX Encontro Nacional de Economia [Proceedings of the 29th Brazilian Economics Meeting] 029, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  6. Pedro H. Albuquerque, 2000. "An Information Theory Approach to the Aggregation of Log-Linear Models," Working Papers Series 4, Central Bank of Brazil, Research Department.
  7. Pedro Cavalcanti Ferreira & Osmani Teixeira de Carvalho Guillén, 2004. "Estrutura Competitiva, Produtividade Industrial e Liberalização Comercial no Brasil," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 58(4), pages 507-532, October.
  8. Marcelo Kfoury Muinhos & Sérgio Afonso Lago Alves & Gil Riella, 2002. "Modelo Estrutural com Setor Externo: Endogenização do Prêmio de Risco e do Câmbio," Working Papers Series 42, Central Bank of Brazil, Research Department.
  9. Francisco Marcos R. Figueiredo & Roberta Blass Staub, 2001. "Algumas Considerações Sobre a Sazonalidade no IPCA," Working Papers Series 31, Central Bank of Brazil, Research Department.
  10. Eduardo Lundberg, 2000. "Monetary Policy and Banking Supervision Functions on the Central Bank," Working Papers Series 2, Central Bank of Brazil, Research Department.
  11. Francisco Marcos Rodrigues Figueiredo, 2001. "Evaluating Core Inflation Measures for Brazil," Working Papers Series 14, Central Bank of Brazil, Research Department.
  12. Marcelle Chauvet, 2000. "Leading Indicators of Inflation for Brazil," Working Papers Series 7, Central Bank of Brazil, Research Department.
  13. Victorio Y. T. Chu & Márcio I. Nakane, 2001. "Credit Channel without the LM Curve," Working Papers Series 20, Central Bank of Brazil, Research Department.
  14. Fajardo, J. & Farias, A., 2003. "Generalized Hyperbolic Distributions and Brazilian Data," Finance Lab Working Papers flwp_57, Finance Lab, Insper Instituto de Ensino e Pesquisa.
  15. Sergio Afonso Lago Alves, 2001. "Evaluation of the Central Bank of Brazil Structural Model's Inflation Forecasts in an Inflation Targeting Framework," Working Papers Series 16, Central Bank of Brazil, Research Department.
  16. Michael F. Bryan & Stephen G. Cecchetti, 2001. "A Note on the Efficient Estimation of Inflation in Brazil," Working Papers Series 11, Central Bank of Brazil, Research Department.
  17. Sandro Canesso de Andrade & Benjamin Miranda Tabak, 2001. "Is it Worth Tracking Dollar/Real Implied Volatility?," Working Papers Series 15, Central Bank of Brazil, Research Department.
  18. Benjamin Miranda Tabak & Sandro Canesso de Andrade, 2001. "Testing the Expectations Hypothesis in the Brazilian Term Structure of Interest Rates," Working Papers Series 30, Central Bank of Brazil, Research Department.
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