Firm Size and Volatility Analysis in the Spanish Stock Market

41 Pages Posted: 20 Feb 2007

See all articles by Helena Chuliá

Helena Chuliá

University of Barcelona - Faculty of Economic Science and Business Studies

Hipòlit Torró

University of Valencia

Date Written: February 2007

Abstract

In this article, three strongly related questions are studied. First, volatility spillovers between large and small firms in the Spanish stock market are analyzed by using a conditional CAPM with an asymmetric multivariate GARCH-M covariance structure. Results show that there exist bidirectional volatility spillovers between both types of firms, especially after bad news. Second, the volatility feedback hypothesis explaining the volatility asymmetry feature is investigated. Results show significant evidence for this hypothesis. Finally, the study uncovers that conditional beta coefficient estimates within the used model are insensitive to sign and size asymmetries in the unexpected shock returns but the unconditional beta estimate has a significant error specification. These results are relevant for asset valuation, portfolio management and dynamic hedging strategies design.

Keywords: Volatility Spillovers, GARCH, Large and Small Firms, Risk Premium

JEL Classification: C12, C32, G11, G12

Suggested Citation

Chuliá, Helena and Torró, Hipòlit, Firm Size and Volatility Analysis in the Spanish Stock Market (February 2007). Available at SSRN: https://ssrn.com/abstract=963963 or http://dx.doi.org/10.2139/ssrn.963963

Helena Chuliá (Contact Author)

University of Barcelona - Faculty of Economic Science and Business Studies ( email )

Barcelona
Spain

Hipòlit Torró

University of Valencia ( email )

Facultat d'Economia
Av. dels Tarongers s/n
Valencia, 46022
Spain
34-6-162 50 74 (Phone)
34-6-382 83 70 (Fax)

HOME PAGE: http://www.uv.es/torro

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