An analysis of firm and market volatility
AbstractIn this paper, using time series data for the period 2 January 1998 to 31 December 2008, for 560 firms listed on the NYSE, we examine whether firm volatility is related to market volatility. The main contribution of this paper is that we develop the analytical framework motivating the firm-market volatility relationship. We unravel three new findings on volatility. First, we discover significant evidence of common volatility; for 12 out of 14 sectors, market volatility has a statistically significant effect on firm volatility for at least 50 percent of firms. Second, we discover significant evidence of size effects: for small sized firms, there is weak evidence of commonality in volatility, while for large sized firms there is high evidence (as much as 75 percent of firms) of commonality in volatility. Third, we find that market volatility predicts firm volatility for firms belonging to five of the 14 sectors.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Financial Econometics Series with number 2011_02.
Date of creation: 29 Aug 2011
Date of revision:
Contact details of provider:
Postal: 221 Burwood Highway, Burwood 3125
Phone: 61 3 9244 3815
Web page: http://www.deakin.edu.au/buslaw/aef/index.php
Volatility; Size Effects; Firms; Market;
Other versions of this item:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-05 (All new papers)
- NEP-CFN-2011-09-05 (Corporate Finance)
- NEP-FMK-2011-09-05 (Financial Markets)
- NEP-SBM-2011-09-05 (Small Business Management)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr Susan S Sharma).
If references are entirely missing, you can add them using this form.