An analysis of firm and market volatility

Susan Sharma, Paresh Narayan () and Xinwei Zheng

Economic Systems, 2014, vol. 38, issue 2, 205-220

Abstract: In this paper, using time series data for the period 2 January 1998 to 31 December 2008 for 560 firms listed on the NYSE, we examine whether firm volatility is related to market volatility. The main contribution of this paper is that we develop an analytical framework motivating the firm-market volatility relationship. We present three new findings on volatility. First, we discover significant evidence of common volatility; for 12 out of 14 sectors, market volatility has a statistically significant effect on firm volatility for at least 50 percent of firms. Second, we discover significant evidence of size effects: for small-sized firms, there is weak evidence of commonality in volatility, while for large-sized firms there is high evidence (for as much as 75 percent of firms) of commonality in volatility. Third, we find that market volatility predicts firm volatility for firms belonging to five of the 14 sectors.

Keywords: Volatility; Size effects; Firms; Market (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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Working Paper: An analysis of firm and market volatility (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:38:y:2014:i:2:p:205-220

DOI: 10.1016/j.ecosys.2013.12.003

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