The source of stock return fluctuation in Taiwan

De-Chih Liu and Chih-Yun Liu

The Quarterly Review of Economics and Finance, 2016, vol. 61, issue C, 77-88

Abstract: This paper explores the nature of Taiwanese stock return fluctuation from 1992–2013. We employ a dynamic latent factor model that decomposes stock return fluctuations into aggregate, sectoral and granular components. In the full sample period we find that the aggregate factor contributes 45 percent of the stock return volatility, whereas the granular factor on average accounts for another 45 percent of stock return variation. When sub-sample analysis is executed, we again fail to reject the importance of aggregate and granular factors. These results are closer to the aggregate (and granular) paradigm rather than the sectoral paradigm.

Keywords: Stock return; Aggregate shock; Sectoral shock; Granular hypothesis (search for similar items in EconPapers)
JEL-codes: E3 G1 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:61:y:2016:i:c:p:77-88

DOI: 10.1016/j.qref.2015.11.006

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