On the Relationship Between the Conditional Mean and Volatility of Stock Returns PDF Download
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Author: Michael W. Brandt
Publisher:
ISBN:
Category : Rate of return
Languages : en
Pages : 49
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Book Description
We model the conditional mean and volatility of stock returns as a latent vector autoregressive (VAR) process to study the contemporaneous and intertemporal relationship between expected returns and risk in a flexible statistical framework and without relying on exogenous predictors. We find a strong and robust negative correlation between the innovations to the conditional moments that leads to pronounced counter-cyclical variation in the Sharpe ratio. We document significant lead-lag correlations between the conditional moments that also appear related to business cycles. Finally, we show that although the conditional correlation between the mean and volatility is negative, the unconditional correlation is positive due to the lead-lag correlations
Author: Michael W. Brandt
Publisher:
ISBN:
Category : Rate of return
Languages : en
Pages : 49
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Book Description
We model the conditional mean and volatility of stock returns as a latent vector autoregressive (VAR) process to study the contemporaneous and intertemporal relationship between expected returns and risk in a flexible statistical framework and without relying on exogenous predictors. We find a strong and robust negative correlation between the innovations to the conditional moments that leads to pronounced counter-cyclical variation in the Sharpe ratio. We document significant lead-lag correlations between the conditional moments that also appear related to business cycles. Finally, we show that although the conditional correlation between the mean and volatility is negative, the unconditional correlation is positive due to the lead-lag correlations
Author: Michael W. Brandt
Publisher:
ISBN:
Category :
Languages : en
Pages : 49
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Book Description
Author: Michael W. Brandt (Ph.D.)
Publisher:
ISBN:
Category : Rate of return
Languages : en
Pages :
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Book Description
Author: Rochelle L. Antoniewicz
Publisher:
ISBN:
Category : Rate of return
Languages : en
Pages : 66
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Book Description
Author: Qi Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 27
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Book Description
This study examines the relationship between expected stock returns and volatility in the twelve largest international stock markets during January 1980 - December 2001. Consistent with most previous studies, we find a positive but insignificant relationship during the sample period for the majority of the markets based on parametric EGARCH-M models. However, using a flexible semiparametric specification of conditional variance, we find evidence of a significant negative relationship between expected returns and volatility in six out of the twelve markets under study. The results lend support to the recent claim (Bekaert and Wu, 2000; Whitelaw, 2000) that stock market returns are negatively correlated with stock market volatility.
Author: Tanguy de Launois
Publisher: Presses univ. de Louvain
ISBN: 2874631744
Category : Business & Economics
Languages : en
Pages : 275
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Book Description
We all have in mind a couple of dramatic examples of how information released by some economical or political entity resulted in tremendous consequences for a private company or, worst, for the whole financial market. This is the purpose of this dissertation to investigate the relations between information,stock volatility and the cost of capital. After the extension of the standard CAPM model to a more realistic world where some investors are “constrained” and deviate from their optimal CAPM quantities, we confront our theoretical model to the empirical reality by investigating the so-called “index effect”. Thanks to econometric specifications robust to endogeneity, we test different hypotheses proposed by the literature to explain this well known value premium of firms belonging to large indices. In a next step, we investigate how the quality and quantity of micro and macro public signals impact the main determinants of our pricing equation initially developed. We show that in a world of constrained investors, firms benefiting from a high deviation have less incentive to communicate than others. Finally, we study the link between public information and conditional volatility thanks to an original sample of several tens of thousands of Reuters and Dow Jones news releases on both the French and US markets. Thanks to various econometric specifications like GARCH models and Markov Switching Regressions, we conclude that a larger daily number of news releases increases the probability to be in the high probability regime and that the impact ofinformation is strongly dependent on the topic and the timing of the release of this information.
Author: Chowdhury B. A. Mustafa
Publisher:
ISBN:
Category : Stocks
Languages : en
Pages : 272
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Book Description
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Gabriel Perez-Quiros
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 34
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Book Description
Author: Ramon P. DeGennaro
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Most asset pricing models postulate a positive relationship between a stock portfolio's expected returns and risk, which is often modeled by the variance of the asset price. This paper uses GARCH-in-mean models to examine the relationship between mean returns on a stock portfolio and its conditional variance or standard deviation.After estimating a variety of models from daily and monthly portfolio return data we conclude that any relationship between mean returns and own variance or standard deviation is weak. The results suggest that investors consider some other risk measure to be more important than the variance of portfolio returns.
