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Stock Returns and Volatility

Benjamin Tabak () and Solange Guerra

No 54, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper examines the relationship between stock returns and volatility over the period of June 1990 to April 2002. We study firm-level relationship between stock returns and volatility for a sample of 25 time series for Brazilian stocks. Using Seemingly Unrelated Regressions (SUR) empirical evidence suggests that contemporaneous returns and volatilities are significantly and positively correlated while there is a negative relationship between changes in volatility and stock returns. Finally, the "leverage effect" seems to hold for Brazilian stocks as shown by the results from an AR (1)-EGARCH (1,1) estimation.

Date: 2002-11
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