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| Author: | Chuliá, H. Torró, H. |
| Title: | Firm size and volatility analysis in the Spanish stock market |
| Journal: | European Journal of Finance
2011 : AUG-SEP, VOL. 17:7-8, p. 695-715 |
| Index terms: | companies companies by size volatility risk premium Spain stock markets data analysis |
| Freeterms: | spillovers Capital Asset Pricing Model (CAPM) GARCH |
| Language: | eng |
| Abstract: | Based on Spanish stock market data, this article examines and analyzes volatility spillovers between large and small firms and their impact on expected returns. By using a conditional capital asset pricing model (CAPM) with an asymmetric multivariate GARCH-M covariance structure, it is shown that there exist bi-directional volatility spillovers btw. both types of companies, especially after bad news. After estimating the model, a positive and significant price of risk is obtained. This result is consistent with the volatility feedback effect, one of the most popular explanations of the asymmetric volatility phenomenon. It explains why risk premiums are much more sensitive to negative return shocks coming from the whole market or other related markets. |
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