A Reexamination of the Causes of Time-Varying Stock Return Volatilities

This research investigated the performance of a dynamic portfolio that consists of sustainable/ethical stocks and gold. The main purpose of this study is to prove that the inclusion of gold in sustainable/ethical stocks portfolios could produce better performance. Therefore, the method used in this research, DCC-GARCH, was relaxing the basic assumptions in the theory of modern portfolio that is under the assumption of the normality of stock return and securities would have constant correlation. This research used data such as SRI-KEHATI Index (SKI) and Jakarta Islamic Index (JII) in Indonesia as a proxy for sustainable investments. Additionally, this research used gold from 2013 to 2019. This study is able to provide evidence regarding the ability of a dynamic portfolio to minimize the level of portfolio risk. However, this led a lower rate of return. Based on the OLS regression, gold is also proven as a weak safe haven for sustainable investment in Indonesia. Investors who believe in ethical investment may include gold in this time-varying approach when formulating the portfolio to reduce risk significantly. The inclusion of gold in portfolios could produce hedging effectiveness. Overall, this study supports some previous findings regarding the ability of gold as an instrument, which could reduce investment risk if involved in a portfolio.

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International stock return predictability: Is the role of U.S. time-varying?

Empirica ◽

10.1007/s10663-015-9313-3 ◽

2015 ◽

Vol 44 (1) ◽

pp. 121-146 ◽

Cited By ~ 11

Author(s):

Goodness C. Aye ◽

Mehmet Balcilar ◽

Rangan Gupta

Keyword(s):

Stock Return ◽

Return Predictability ◽

Time Varying ◽

Stock Return Predictability

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Time-Varying Risk and the Relation between Idiosyncratic Risk and Stock Return

Journal of Risk and Financial Management ◽

10.3390/jrfm14090432 ◽

2021 ◽

Vol 14 (9) ◽

pp. 432

Author(s):

Chengbo Fu

Keyword(s):

Stock Returns ◽

Stock Return ◽

Idiosyncratic Risk ◽

Point Of View ◽

Time Varying ◽

Total Risk ◽

Risk Return ◽

Long Run ◽

Book To Market Ratio ◽

The 1960S

This paper studies the historical time-varying dynamics of risk for individual stocks in the U.S. market. Total risk of an individual stock is decomposed into two components, systematic risk and idiosyncratic risk, and both components are studied separately. We start from the historical trend in the magnitude of risk and then turn to the relation between idiosyncratic risk and stock returns. The result shows that both components of risk for individual stocks are changing over time. They increased from the 1960s to the 1990s/2000s and then declined until today. This paper also studies the risk-return tradeoff by investigating the relation between idiosyncratic risk and stock return in the long run. Stocks are sorted into portfolios for analysis and the whole sample period is further decomposed into decades for subgroup analysis. Multivariable regressions are used to study this relation as we control for beta, size, book-to-market ratio, momentum and liquidity. From a historical point of view, we show that the relation between idiosyncratic risk and stock return is time-varying, and it did not exist in certain decades. The results indicate that the risk-return tradeoff also varied in history.

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Time-Varying Earnings Persistence and the Delayed Stock Return Reaction to Earnings Announcements*

Contemporary Accounting Research ◽

10.1111/j.1911-3846.2012.01165.x ◽

2012 ◽

Vol 30 (2) ◽

pp. 549-578 ◽

Cited By ~ 11

Author(s):

Changling Chen

Keyword(s):

Stock Return ◽

Earnings Announcements ◽

Earnings Persistence ◽

Time Varying

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A Multivariate Analysis of the Effects of Structural Breaks on Stock Return Volatility Persistence: The Case of the US and Japan

International Journal of Business Administration ◽

10.5430/ijba.v10n3p39 ◽

2019 ◽

Vol 10 (3) ◽

pp. 39

Author(s):

Chikashi Tsuji

Keyword(s):

Multivariate Analysis ◽

Stock Returns ◽

Stock Return ◽

Structural Breaks ◽

Structural Break ◽

Return Volatility ◽

Time Varying ◽

Stock Return Volatility ◽

Volatility Persistence ◽

The Us

This paper quantitatively inspects the effects of structural breaks in stock returns on their volatility persistence by using the stock return data of the US and Japan. More concretely, applying the diagonal BEKK-MGARCH model with and without structural break dummies to the returns of S&P 500 and TOPIX, we reveal the following interesting findings. (1) First, we clarify that for both the US and Japanese stock returns, the values of the GARCH parameters, namely, the values of the volatility persistence parameters in the diagonal BEKK-MGARCH models decrease when we include the structural break dummies in the models. (2) Second, we further find that interestingly, during the Lehman crisis in 2008, the estimated time-varying volatilities from the diagonal BEKK-MGARCH model with structural break dummies are slightly higher than those from the no structural break dummy model. (3) Third, we furthermore reveal that also very interestingly, the estimated time-varying correlations from the diagonal BEKK-MGARCH model with no structural break dummy are slightly higher than those from the structural break dummy model.

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Empirical Investigation of the Causal Relationships Among Herding, Stock Market Returns, and Illiquidity: Evidence from Major Asian Markets

Review of Pacific Basin Financial Markets and Policies ◽

10.1142/s0219091514500180 ◽

2014 ◽

Vol 17 (03) ◽

pp. 1450018 ◽

Cited By ~ 3

Author(s):

Zhuo Qiao ◽

Thomas C. Chiang ◽

Lin Tan

Keyword(s):

Stock Returns ◽

Stock Return ◽

Empirical Investigation ◽

Filter Method ◽

Time Varying ◽

Herding Behavior ◽

Market Returns ◽

Stock Market Returns ◽

Causality Tests ◽

Kalman Filter Method

We apply the Kalman filter method to estimate nine Asian markets and find evidence that stock return dispersions decline as markets experience stress conditions, supporting the existence of herding. This paper finds that herding behavior is time-varying and comoving across markets. Both linear and nonlinear Granger causality tests conclude that there is strong bilateral causality between herding and returns for all nine Asian markets. For markets in Japan, South Korea, and Thailand, we consistently find strong two-way causality exists in pairwise variables among herding, stock returns, and illiquidity. No consistent evidence can be drawn from other markets for other pairwise variables.

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