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Factors affecting stock return volatility in the banking sector in the euro zone

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  • Niewińska Katarzyna

    (Department of Insurance and Capital Markets, Faculty of Management, University of Warsaw, Warsaw, Poland)

Abstract

Aim/purpose – The purpose of this paper is to examine the influence of internal and external historical determinants on the volatility of banks’ stock returns in the euro zone. A dedicated database has been created to identify factors significantly affecting volatility. Design/methodology/approach – The study is based on information about banks listed on the stock exchanges of the euro zone economies. Quarterly data from the period of 2004-2015 along with static panel models were used as the research method. Findings – Results confirm that selected factors have a significant impact on the analysed variables: the ratio of long-term investments to assets, solvency ratio, price to book value, the unemployment rate, beta, as well as implied volatilities in S&P500 and EUROSTOXX50 indexes. Research implications/limitations – Results can be used to estimate future stock return volatility more accurately. The survey focuses solely on the banking sector, which is the biggest limitations of this research and the findings cannot be used to other sectors. Originality/value/contribution – Most volatility research serves the purpose of predicting future stock prices. Very few papers explain which factors in particular impact volatility.

Suggested Citation

  • Niewińska Katarzyna, 2020. "Factors affecting stock return volatility in the banking sector in the euro zone," Journal of Economics and Management, Sciendo, vol. 39(1), pages 132-148, March.
    • Handle: RePEc:vrs:jecman:v:39:y:2020:i:1:p:132-148:n:4
    DOI: 10.22367/jem.2020.39.07
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    beta; unemployment; historical volatility; implied volatility;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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