Stock Returns and Volatility: Another Look
Ramon P. DeGennaro
University of Tennessee, Knoxville - Department of Finance
Yuzhen Lisa Zhao
Most empirical work examining the intertemporal mean-variance relationship in stock returns has tended to use relatively simple specifications of the mean and especially of the conditional variance. We augment the information set to include economic variables that other researchers have found to be important and use GARCH-M models to explore the relation between volatility and expected stock returns. We find that the additional variables have little impact on the conditional variance and that any intertemporal relationship between volatility and stock returns is weak or unstable. Our results signal the need for theoretical models of the intertemporal volatility-return relationship, and call for further studies of the determinants of the conditional variance of stock returns.
Number of Pages in PDF File: 29
Keywords: stock returns, volatility, risk, expected returns
JEL Classification: D4, G0, G1, M5, C5working papers series
Date posted: February 28, 2003
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.359 seconds