The New Market effect on return and volatility of Spanish stock indexes

Juan Angel Lafuente and Jesus Ruiz

Applied Financial Economics, 2004, vol. 14, issue 18, 1343-1350

Abstract: Recently (April 2000), the New Market index began to be computed in the Spanish Stock Exchange as a relevant indicator of the new technological firms' behaviour in the Spanish economy. This paper provides empirical evidence about the relationships between the return and volatility of Spanish sector indexes and the New Market index volatility. Using GARCH methodology, empirical results reveal a positive significant impact on the financial, industrial and utilities sector volatility, that is, high volatility in New Market tends to increase volatility in the other sectors. On the other hand, only a statistical effect is detected on returns of the industrial sector, suggesting that only this sector require a risk premium when shocks in the technological sector increase the global market risk.

Date: 2004
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DOI: 10.1080/09603100410001692828

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