Stock Returns and Volatility: Evidence from Select Emerging Markets

Ravinder Kumar Arora (), Himadri Das () and Pramod Kumar Jain ()
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Ravinder Kumar Arora: International Management Institute, B-10, Qutab Institutional Area, New Delhi, India
Himadri Das: International Management Institute, B-10, Qutab Institutional Area, New Delhi, India
Pramod Kumar Jain: Department of Management Studies, Indian Institute of Technology Delhi, New Delhi, India

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2009, vol. 12, issue 04, 567-592

Abstract: This paper investigates the behavior of stock returns and volatility in 10 emerging markets and compares them with those of developed markets under different measures of frequency (daily, weekly, monthly and annual) over the period January 1, 2002 to December 31, 2006. The ratios of mean return to volatility for emerging markets are found to be higher than those of developed markets. Sample statistics for stock returns of all emerging and developed markets indicate that return distributions are not normal and return volatility shows clustering. In most cases, GARCH (1, 1) specification is adequate to describe the stock return volatility. The significant lag terms in the mean equation of GARCH specification depend on the frequency of the return data. The presence of leverage effect in volatility behavior is examined using the TAR-GARCH model and the evidence indicates that is not present across all markets under all measures of frequency. Its presence in different markets depends on the measure of frequency of stock return data.

Keywords: Stock returns; volatility; emerging markets; GARCH models (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (8)

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DOI: 10.1142/S0219091509001757

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