Time Varying Volatility and the Cross-Section of Equity Returns Â

Chris Brooks, Xiafei Li and Joelle Miffre
Additional contact information
Xiafei Li: Nottingham University Business School
Joelle Miffre: EDHEC, Nice, France

ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading

Abstract: A vast literature has documented the value premium and the small firm effect as pervasive stylized facts in empirical asset pricing and yet research has been largely unable to provide entirely convincing explanations of why these phenomena exist. This paper demonstrates that the cross-sectional variation in returns between portfolios sorted by size and book-to-market value is significantly and positively related to the conditional volatility of those portfolios. We show that the explanatory power of the portfolios' sensitivities to conditional volatility for the cross-section of returns is in addition to that embodied in the sensitivities to market risk, macroeconomic, book-to-market and market capitalization factors.

Keywords: cross-sectional variation in stock returns; CAPM; GARCH-M; conditional volatility; risk premium. (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2009-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.icmacentre.ac.uk/files/icma_centre_dp_200901_17.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.icmacentre.ac.uk/files/icma_centre_dp_200901_17.pdf [302 Found]--> https://www.icmacentre.ac.uk/files/icma_centre_dp_200901_17.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rdg:icmadp:icma-dp2009-01

Access Statistics for this paper

More papers in ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading Contact information at EDIRC.
Bibliographic data for series maintained by Marie Pearson ().