Welcome to the InfoSci Platform
Macroeconomic Sensitivity, Risk-Return Trade-Off and Volatility Dynamics Evidence From Developed and Developing Markets

Macroeconomic Sensitivity, Risk-Return Trade-Off and Volatility Dynamics Evidence From Developed and Developing Markets

Faisal Khan, Hashim Khan, Saif Ur-Rehman Khan, Muhammad Jumaa, Sharif Ullah Jan
Copyright: © 2019 |Volume: 6 |Issue: 1 |Pages: 16
ISSN: 2334-4628|EISSN: 2334-4636|EISBN13: 9781522568346|DOI: 10.4018/IJCFA.2019010101
Cite Article Cite Article

MLA

Khan, Faisal, et al. "Macroeconomic Sensitivity, Risk-Return Trade-Off and Volatility Dynamics Evidence From Developed and Developing Markets." IJCFA vol.6, no.1 2019: pp.1-16. http://doi.org/10.4018/IJCFA.2019010101

APA

Khan, F., Khan, H., Khan, S. U., Jumaa, M., & Jan, S. U. (2019). Macroeconomic Sensitivity, Risk-Return Trade-Off and Volatility Dynamics Evidence From Developed and Developing Markets. International Journal of Corporate Finance and Accounting (IJCFA), 6(1), 1-16. http://doi.org/10.4018/IJCFA.2019010101

Chicago

Khan, Faisal, et al. "Macroeconomic Sensitivity, Risk-Return Trade-Off and Volatility Dynamics Evidence From Developed and Developing Markets," International Journal of Corporate Finance and Accounting (IJCFA) 6, no.1: 1-16. http://doi.org/10.4018/IJCFA.2019010101

Export Reference

Mendeley
Favorite Full-Issue Download

Abstract

This study aims to examine the impact of macroeconomic factors on the stock return volatility along with the pricing of risk, and asymmetry and leverage effect on a comparative basis for the USA and UAE markets. Further, these three dimensions are also investigated with regard to various firm's features (such as firm's size and age). The daily data for the period 4th January 2010 to 29th December 2017 of firm stock returns from the New York Stock Exchange (NYSE), the Abu Dhabi Securities Exchange (ADSE), and the Dubai Financial Market (DFM) is considered and three time-series models were applied. The results from GARCH (1. 1) indicated that all the economic factors have significant impact on the stock return volatility in both the markets. Similarly, the study also found evidence of asymmetry & leverage effect using EGARCH in the NYSE (for all firms) and the UAE (partially). Finally, for a majority of the firms, a positive risk-return relationship is found in the UAE and a negative risk-return relationship is found in the NYSE using GARCH-in the mean. Interestingly, these results in context of both markets were different with respect to various firm features such as firm size and age. In light of these results, it is concluded that both the markets have different dynamics with regard to all three dimensions. Hence, the investors have a clear opportunity to diversify their risk and investments across developed and emerging markets.

Request Access

You do not own this content. Please login to recommend this title to your institution's librarian or purchase it from the IGI Global bookstore.