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Stock Returns and Volatility: Evidence from Select Emerging Markets

Author

Listed:
  • Ravinder Kumar Arora

    (International Management Institute, B-10, Qutab Institutional Area, New Delhi, India)

  • Himadri Das

    (International Management Institute, B-10, Qutab Institutional Area, New Delhi, India)

  • Pramod Kumar Jain

    (Department of Management Studies, Indian Institute of Technology Delhi, New Delhi, India)

Abstract

This paper investigates the behavior of stock returns and volatility in 10 emerging markets and compares them with those of developed markets under different measures of frequency (daily, weekly, monthly and annual) over the period January 1, 2002 to December 31, 2006. The ratios of mean return to volatility for emerging markets are found to be higher than those of developed markets. Sample statistics for stock returns of all emerging and developed markets indicate that return distributions are not normal and return volatility shows clustering. In most cases, GARCH (1, 1) specification is adequate to describe the stock return volatility. The significant lag terms in the mean equation of GARCH specification depend on the frequency of the return data. The presence of leverage effect in volatility behavior is examined using the TAR-GARCH model and the evidence indicates that is not present across all markets under all measures of frequency. Its presence in different markets depends on the measure of frequency of stock return data.

Suggested Citation

  • Ravinder Kumar Arora & Himadri Das & Pramod Kumar Jain, 2009. "Stock Returns and Volatility: Evidence from Select Emerging Markets," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 12(04), pages 567-592.
    • Handle: RePEc:wsi:rpbfmp:v:12:y:2009:i:04:n:s0219091509001757
    DOI: 10.1142/S0219091509001757
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    Citations

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    Cited by:

    1. Dipasha Sharma, 2018. "Stock Market Performance and Efficiency of Banks in a Developing Economy: Evidence from the Indian Banking Sector," IIM Kozhikode Society & Management Review, , vol. 7(2), pages 178-193, July.
    2. Andy Wui Wing Cheng & Iris Wing Han Yip, 2017. "China’s Macroeconomic Fundamentals on Stock Market Volatility: Evidence from Shanghai and Hong Kong," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 20(02), pages 1-57, June.
    3. Yew-Choe Lum & Sardar M. N. Islam, 2016. "Time Varying Behavior of Share Returns in Australia: 1988–2004," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(01), pages 1-14, March.
    4. Sharif Mozumder & Ghulam Sorwar & Kevin Dowd, 2013. "Option pricing under non-normality: a comparative analysis," Review of Quantitative Finance and Accounting, Springer, vol. 40(2), pages 273-292, February.
    5. Angelos Kanas, 2014. "Uncovering a positive risk-return relation: the role of implied volatility index," Review of Quantitative Finance and Accounting, Springer, vol. 42(1), pages 159-170, January.
    6. Taner Sekmen, 2015. "Effect of the Subprime Crisis on Return and Volatility of the Turkish Stock Market," Journal of Economics and Behavioral Studies, AMH International, vol. 7(3), pages 23-29.
    7. Krzysztof DRACHAL, 2017. "Volatility Clustering, Leverage Effects and Risk-Return Tradeoff in the Selected Stock Markets in the CEE Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 37-53, September.
    8. Cheng-Few Lee & Jung-Bin Su, 2012. "Alternative statistical distributions for estimating value-at-risk: theory and evidence," Review of Quantitative Finance and Accounting, Springer, vol. 39(3), pages 309-331, October.

    More about this item

    Keywords

    Stock returns; volatility; emerging markets; GARCH models;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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