Asymmetric Conditional Volatility and Firm Size: Evidence from Australian Equity Portfolios

Ólan Henry and John Sharma

Australian Economic Papers, 1999, vol. 38, issue 4, 393-406

Abstract: This paper examines the relationship between firm size and equity volatility for two portfolios of Australian equities. Univariate and Multivariate GARCH models are used to demonstrate that conditional variance is related to firm size. There is strong evidence to suggest that the variance‐covariance matrix of returns is time varying and asymmetric. A negative innovation to the return of the large firm portfolio results in higher levels of conditional volatility in the small firm portfolio than would be the case for a positive innovation of equal magnitude. News about own returns appears to determine the conditional variance of the portfolio of large firms. The conditional covariance between the two portfolios also displays evidence of asymmetry.

Date: 1999
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https://doi.org/10.1111/1467-8454.00064

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Working Paper: Asymmetric Conditional Volatility and Firm Size: Evidence from Australian Equity Portfolios (1998)
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