IDEAS home Printed from https://ideas.repec.org/a/eee/phsmap/v508y2018icp280-288.html
   My bibliography  Save this article

Distributional characteristics of interday stock returns and their asymmetric conditional volatility: Firm-level evidence

Author

Listed:
  • Balaban, Ercan
  • Ozgen, Tolga
  • Girgin, Mehmet Sencer

Abstract

This paper is a pioneering effort to jointly analyze the characteristics of interday distributions of stock returns and their asymmetric time varying volatility using firm-level data in local currency from an emerging stock market, namely, the Bourse Istanbul, for the period January 1996 to December 2015. Using a modified Threshold Generalized Autoregressive Conditional Heteroscedasticity-in-Mean [TGARCH(1,1)-M] model; these distributional characteristics statistically assess in a unique framework (i) the weak-form informational efficiency based on the stylized facts of day of the week effects on stock returns and their conditional volatility; (ii) volatility persistence and asymmetry in conditional volatility; and (iii) the conditional total risk–return relationship, and the impact of systematic risk as an asset pricing factor. It is found that at firm level there are statistically significant positive or negative day of the week effects on either stock returns or their conditional volatility, or both. However, for a sample of 120 firms, a full and cross-sectional analysis of the interday distributions does not lead to a systematic pattern of return differences across days of the week. The average volatility is found to be highest on Mondays and the lowest on Wednesdays. It is reported that – as a proxy of total risk in a mean–variance framework – the estimated conditional standard deviation does not have a significant impact on stock returns for the great majority of the sample firms. With reference to the total risk–return relationship and the asymmetry in volatility, there are no significant differences between the industrial and financial sector companies. It is reported that the systematic risk is always priced; and the results are highly significant with a high explanatory power. Volatility is decidedly persistent for all firms investigated; while, a significant asymmetry in the conditional volatility cannot be reported for most of the firms. Contributing to the existing literature as a first time analysis of firm-level distributional characteristics of interday stock returns and their asymmetric conditional volatility with an additional proper risk-impact investigation, the empirical results are of importance primarily for asset pricing and risk management research and practice.

Suggested Citation

  • Balaban, Ercan & Ozgen, Tolga & Girgin, Mehmet Sencer, 2018. "Distributional characteristics of interday stock returns and their asymmetric conditional volatility: Firm-level evidence," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 508(C), pages 280-288.
    • Handle: RePEc:eee:phsmap:v:508:y:2018:i:c:p:280-288
    DOI: 10.1016/j.physa.2018.05.019
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378437118305569
    Download Restriction: Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000
    File URL: https://libkey.io/10.1016/j.physa.2018.05.019?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dumitriu, Ramona & Stefanescu, Razvan, 2013. "DOW effects in returns and in volatility of stock markets during quiet and turbulent times," MPRA Paper 47218, University Library of Munich, Germany, revised 02 Apr 2013.
    2. Ito, Takatoshi & Lin, Wen-Ling, 1992. "Lunch break and intraday volatility of stock returns : An hourly data analysis of Tokyo and New York stock markets," Economics Letters, Elsevier, vol. 39(1), pages 85-90, May.
    3. Lee, Tom K., 1988. "Settlement system and the day-of-the-week effect," Economics Letters, Elsevier, vol. 26(4), pages 353-356.
    4. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. "On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
    5. G. Kohers & N. Kohers & V. Pandey & T. Kohers, 2004. "The disappearing day-of-the-week effect in the world's largest equity markets," Applied Economics Letters, Taylor & Francis Journals, vol. 11(3), pages 167-171.
    6. Bala Arshanapalli & Edmond d'Ouville & Frank Fabozzi & Lorne Switzer, 2006. "Macroeconomic news effects on conditional volatilities in the bond and stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 16(5), pages 377-384.
    7. Seyed Mehdian & Mark J. Perry, 2001. "The Reversal of the Monday Effect: New Evidence from US Equity Markets," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(7‐8), pages 1043-1065, September.
    8. Doyle, John R. & Chen, Catherine Huirong, 2009. "The wandering weekday effect in major stock markets," Journal of Banking & Finance, Elsevier, vol. 33(8), pages 1388-1399, August.
    9. Taufiq Choudhry, 2000. "Day of the week effect in emerging Asian stock markets: evidence from the GARCH model," Applied Financial Economics, Taylor & Francis Journals, vol. 10(3), pages 235-242.
    10. Denise R. Osborn & Christos S. Savva & Len Gill, 2008. "Periodic Dynamic Conditional Correlations between Stock Markets in Europe and the US," Journal of Financial Econometrics, Oxford University Press, vol. 6(3), pages 307-325, Summer.
    11. Ercan Balaban, 1995. "Day of the week effects: new evidence from an emerging stock market," Applied Economics Letters, Taylor & Francis Journals, vol. 2(5), pages 139-143.
    12. Zakoian, Jean-Michel, 1994. "Threshold heteroskedastic models," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 931-955, September.
    13. Lakonishok, Josef & Levi, Maurice, 1982. "Weekend Effects on Stock Returns: A Note," Journal of Finance, American Finance Association, vol. 37(3), pages 883-889, June.
    14. Balaban, Ercan & Ozgen, Tolga & Karidis, Socrates, 2018. "Intraday and interday distribution of stock returns and their asymmetric conditional volatility: Firm-level evidence," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 503(C), pages 905-915.
    15. Steeley, James M., 2001. "A note on information seasonality and the disappearance of the weekend effect in the UK stock market," Journal of Banking & Finance, Elsevier, vol. 25(10), pages 1941-1956, October.
    16. Jorge Brusa & Pu Liu & Craig Schulman, 2005. "Weekend Effect, ‘Reverse’ Weekend Effect, and Investor Trading Activities," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(7‐8), pages 1495-1517, September.
    17. Yeliz Yalcin & Eray M. Yycel, 2006. "The Day-of-the-Week Effect on Stock-Market Volatility and Return: Evidence from Emerging Markets (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 56(5-6), pages 258-277, May.
    18. Kiymaz, Halil & Berument, Hakan, 2003. "The day of the week effect on stock market volatility and volume: International evidence," Review of Financial Economics, Elsevier, vol. 12(4), pages 363-380.
    19. Comerton-Forde, Carole & Rydge, James, 2006. "The current state of Asia-Pacific stock exchanges: A critical review of market design," Pacific-Basin Finance Journal, Elsevier, vol. 14(1), pages 1-32, January.
    20. Seyed Mehdian & Mark J. Perry, 2001. "The Reversal of the Monday Effect: New Evidence from US Equity Markets," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(7&8), pages 1043-1065.
    21. Penman, Stephen H., 1987. "The distribution of earnings news over time and seasonalities in aggregate stock returns," Journal of Financial Economics, Elsevier, vol. 18(2), pages 199-228, June.
    22. Jorge Brusa & Pu Liu & Craig Schulman, 2005. "Weekend Effect, 'Reverse' Weekend Effect, and Investor Trading Activities," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(7-8), pages 1495-1517.
    23. Ercan Balaban & Asli Bayar & Ozgur Berk Kan, 2001. "Stock returns, seasonality and asymmetric conditional volatility in world equity markets," Applied Economics Letters, Taylor & Francis Journals, vol. 8(4), pages 263-268.
    24. Gibbons, Michael R & Hess, Patrick, 1981. "Day of the Week Effects and Asset Returns," The Journal of Business, University of Chicago Press, vol. 54(4), pages 579-596, October.
    25. Balaban, Ercan & Ozgen, Tolga, 2016. "Trading session effects on stock returns and their conditional volatility: Firm-level evidence from a European Union accession country," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 446(C), pages 264-271.
    26. Y. -F. Gau & M. Hau, 2004. "Public information, private information, inventory control, and volatility of intraday NTD/USD exchange rates," Applied Economics Letters, Taylor & Francis Journals, vol. 11(4), pages 263-266.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Luo, Kevin & Tian, Shuairu, 2020. "The “Black Thursday” effect in Chinese stock market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    2. Afees A. Salisu & Kazeem Isah & Nnenna Ogbonnaya‐Orji, 2022. "A firm level analysis of asymmetric response of U.S. stock returns to exchange rate movements," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1220-1239, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Balaban, Ercan & Ozgen, Tolga & Karidis, Socrates, 2018. "Intraday and interday distribution of stock returns and their asymmetric conditional volatility: Firm-level evidence," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 503(C), pages 905-915.
    2. Dumitriu, Ramona & Stefanescu, Razvan, 2013. "DOW effects in returns and in volatility of stock markets during quiet and turbulent times," MPRA Paper 47218, University Library of Munich, Germany, revised 02 Apr 2013.
    3. Denise R. Osborn & Christos S. Savva & Len Gill, 2008. "Periodic Dynamic Conditional Correlations between Stock Markets in Europe and the US," Journal of Financial Econometrics, Oxford University Press, vol. 6(3), pages 307-325, Summer.
    4. Georgios Bampinas & Stilianos Fountas & Theodore Panagiotidis, 2015. "The day-of-the-week effect is weak: Evidence from the European Real Estate Sector," Discussion Paper Series 2015_02, Department of Economics, University of Macedonia, revised May 2015.
    5. Leonard Grebe & Dirk Schiereck, 2024. "Day-of-the-week effect: a meta-analysis," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 14(4), pages 1057-1094, December.
    6. Ülkü, Numan & Rogers, Madeline, 2018. "Who drives the Monday effect?," Journal of Economic Behavior & Organization, Elsevier, vol. 148(C), pages 46-65.
    7. Shlomo Zilca, 2017. "Day-of-the-week returns and mood: an exterior template approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 3(1), pages 1-21, December.
    8. Shahid Raza & Sun Baiqing & Imtiaz Hussain & Pwint Kay-Khine, 2023. "Do good and bad news affect the day of the week effect? An analysis of the KSE-100 Index," SN Business & Economics, Springer, vol. 3(7), pages 1-22, July.
    9. Balaban, Ercan & Ozgen, Tolga, 2016. "Trading session effects on stock returns and their conditional volatility: Firm-level evidence from a European Union accession country," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 446(C), pages 264-271.
    10. Chowdhury, Anup & Uddin, Moshfique & Anderson, Keith, 2022. "Trading behaviour and market sentiment: Firm-level evidence from an emerging Islamic market," Global Finance Journal, Elsevier, vol. 53(C).
    11. Olson, Dennis & Mossman, Charles & Chou, Nan-Ting, 2015. "The evolution of the weekend effect in US markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 56-63.
    12. Chatzitzisi, Evanthia & Fountas, Stilianos & Panagiotidis, Theodore, 2021. "Another look at calendar anomalies," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 823-840.
    13. Roberto Joaquín Santillán Salgado & Alejandro Fonseca Ramírez & Luis Nelson Romero, 2019. "The "day-of-the-week" effects in the exchange rate of Latin American currencies," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 14(PNEA), pages 485-507, Agosto 20.
    14. Nickolaos Tsangarakis, 2007. "The day-of-the-week effect in the Athens Stock Exchange (ASE)," Applied Financial Economics, Taylor & Francis Journals, vol. 17(17), pages 1447-1454.
    15. Charles, Amélie, 2010. "The day-of-the-week effects on the volatility: The role of the asymmetry," European Journal of Operational Research, Elsevier, vol. 202(1), pages 143-152, April.
    16. Cho, Young-Hyun & Linton, Oliver & Whang, Yoon-Jae, 2007. "Are there Monday effects in stock returns: A stochastic dominance approach," Journal of Empirical Finance, Elsevier, vol. 14(5), pages 736-755, December.
    17. Hülya Cengiz & Ömer Bilen & Ali Hakan Büyüklü & Gülizar Damgacı, 2017. "Stock market anomalies: the day of the week effects, evidence from Borsa Istanbul," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 7(1), pages 1-11, December.
    18. H. Kent Baker & Abdul Rahman & Samir Saadi, 2008. "The day‐of‐the‐week effect and conditional volatility: Sensitivity of error distributional assumptions," Review of Financial Economics, John Wiley & Sons, vol. 17(4), pages 280-295, December.
    19. Luo, Kevin & Tian, Shuairu, 2020. "The “Black Thursday” effect in Chinese stock market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    20. Högholm, Kenneth & Knif, Johan, 2009. "The impact of portfolio aggregation on day-of-the-week effect: Evidence from Finland," Global Finance Journal, Elsevier, vol. 20(1), pages 67-79.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:508:y:2018:i:c:p:280-288. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.