Volatility effect and the role of firm quality factor in returns: Evidence from the Indian stock market

Volatility effect and the role of firm quality factor in returns: Evidence from the Indian stock market

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In the study, we examine if there are any volatility patterns in stock returns for India. Data are employed for 493 companies that form part of BSE 500 index from March 2000 to November 2013. Unlike previous international evidence, no volatility anomaly is observed. Consistent with theory, high vola...

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Bibliographic Details
Main Authors: Asheesh Pandey, Sanjay Sehgal
Format: Article
Language:English
Published: Elsevier 2017-03-01
Series:IIMB Management Review
Subjects:
Return volatility
CAPM
Fama French model
Volatility anomaly
Firm quality factor
Online Access:http://www.sciencedirect.com/science/article/pii/S097038961730023X
Description
Summary:In the study, we examine if there are any volatility patterns in stock returns for India. Data are employed for 493 companies that form part of BSE 500 index from March 2000 to November 2013. Unlike previous international evidence, no volatility anomaly is observed. Consistent with theory, high volatility stocks significantly outperform low volatility stocks. Alternative risk models fail to explain the volatility effect. Consistent with prior research, we confirm the role of firm quality factor in explaining these volatility patterns. Cash flow variability seems to be a more appropriate measure of firm quality compared to profitability.
ISSN:0970-3896

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