The Impact of Delivery Terms on Stock Return Volatility

Posted: 8 Apr 2003

See all articles by Ramon P. DeGennaro

Ramon P. DeGennaro

University of Tennessee, Knoxville - Department of Finance

Richard Baillie

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management

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Abstract

The application of generalized ARCH models to daily stock returns shows that changes in delivery and payment terms are an important factor in determining measured volatility. In contrast, the holding period between trading days when markets are closed is relatively unimportant. This new approach allows fresh insights into stock return volatility and indicates that subsequent research on stock return volatility should incorporate the effects of payment delays.

Keywords: Stock returns, volatility, market closings, GARCH

JEL Classification: G1, G2

Suggested Citation

DeGennaro, Ramon P. and Baillie, Richard, The Impact of Delivery Terms on Stock Return Volatility. Journal of Financial Services Research, Vol. 3, No. 2. Available at SSRN: https://ssrn.com/abstract=393801

Ramon P. DeGennaro (Contact Author)

University of Tennessee, Knoxville - Department of Finance ( email )

423 Stokely Management Center
Knoxville, TN 37996
United States
865-974-1726 (Phone)
865-974-1716 (Fax)

Richard Baillie

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management ( email )

East Lansing, MI 48824-1121
United States

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