The Impact of External Factors on Stock Return Volatility in the European Banking Sector (Wplyw determinant na zmiennosc stop zwrotow z akcji w sektorze bankowym w Europie)

Katarzyna Niewiñska
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Katarzyna Niewiñska: Faculty of Management, University of Warsaw

Problemy Zarzadzania, 2021, vol. 19, issue 94, 185-199

Abstract: Purpose: The main aim of the paper is to examine the impact of external determinants on the banking stock return volatility to evaluate it in terms of the stock market capitalization. Design/methodology/approach: The research was conducted on 182 banks from 26 countries. The sample selected for the study includes all European banks listed on the stock exchange. Quarterly data from the period between 2004 and 2016 was used; it was collected and compiled over a period of 2 years. The research method applied was the panel data model with fixed effects (with or without a robust estimator) and random effects. Findings: Determinants that have a major and statistically significant impact on the analyzed dependent variables are: the unemployment rate, the real interest rate, the beta in Sharpe’s Single-Index Model and the implied volatility of the S&P 500 index and the EURO STOXX50 index. Research limitations/implications: Insights about the strength and direction of influence of these variables on stock return volatility are a valuable addition to the existing body of knowledge that investors resort to when making decisions relating to the capital market. Limitations: The main limitation of this study lies in the fact that the results of the analysis apply solely to the banking sector. Originality/value: Insights about the strength and direction of influence of these variables on stock return volatility are a valuable addition to the existing body of knowledge that investors resort to when making decisions relating to the capital market.

Keywords: stock return volatility; banking; implied volatility (search for similar items in EconPapers)
JEL-codes: G11 G15 G21 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:sgm:pzwzuw:v:19:i:94:y:2021:p:185-199

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