Stock Market Volatility: Friend or Foe?

Accounting and Finance (2020, vol. 60 (4), p. 3477-3492)

26 Pages Posted: 16 Feb 2021

See all articles by Michael J. Dempsey

Michael J. Dempsey

Ton Duc Thang University (TDTU)

Abey Gunasekarage

Monash University; Monash University

Thanh Truong

RMIT University

Date Written: May 20, 2020

Abstract

Although a good deal of research effort has been allocated to understanding the time-series volatility of stock returns – as both market (or systematic) volatility and idiosyncratic (or non-systematic) volatility – the relationship of such volatility with cross-sectional volatility or dispersion of outcomes is sparse. Nevertheless, the quest to understand one must involve the quest to understand the other. In this paper, we investigate the dynamic of the dispersion of return outcomes in generating a portfolio’s expected return outcome. We find that changes in the level of cross-sectional volatility have highly significant implications for portfolio performances and the notion of risk.

Keywords: Investment horizon, Market return, Market; Risk, Stock performance, Volatility

JEL Classification: G10, G11, G12

Suggested Citation

Dempsey, Michael J. and Gunasekarage, Abeyratna and Truong, Thanh, Stock Market Volatility: Friend or Foe? (May 20, 2020). Accounting and Finance (2020, vol. 60 (4), p. 3477-3492), Available at SSRN: https://ssrn.com/abstract=3750194 or http://dx.doi.org/10.2139/ssrn.3750194

Michael J. Dempsey (Contact Author)

Ton Duc Thang University (TDTU) ( email )

District 7
Ho Chi Minh City, 3001
Vietnam

Abeyratna Gunasekarage

Monash University ( email )

Building 11E
Clayton, Victoria 3800
Australia

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Thanh Truong

RMIT University ( email )

124 La Trobe Street
Melbourne, 3000
Australia

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
20
Abstract Views
117
PlumX Metrics