The Investigation on The Volatility of Stock Returns in Taiwan Stock Market

• Main Authors: Wei-Chuan Lin, 林瑋娟
• Other Authors: 林允永
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/71689278188041875911

碩士 === 淡江大學 === 財務金融學系碩士班 === 95 === In this study, we estimate the volatility of return by GARCH(1,1). We use the ratio of the volatility of each stock return to TAIEX proxy for aggregate volatility risk, and we add Fama & French three-factor model as the fourth risk factor-ratio. Here we are going to discuss the relationship among these four risk factors (Beta, ln(ME), BE/ME, ratio) and the stock return. And, we sort stocks based on idiosyncratic volatility into 5 portfolios. Portfolio 1(5) is the portfolio of stocks with the lowest (highest) idiosyncratic volatility. We want to know if these four factors are still significant in explaining stock returns in different portfolios. We analyze our empirical data with Panel data model. The empirical results show that: 1. From the three factors model: We find there is negative relation between Beta（or BE/ME) and stock return and positive relation between market value and stock return. 2. From the four factors model: We find there is negative relation between Beta（or BE/ME）and stock return and positive relation between market value（or ratio）and stock return. 3. After sort stocks based on idiosyncratic volatility into 5 portfolios. We find there is also negative relation between Beta（or BE/ME）in all portfolios but market value is only significant in the portfolio 1 and portfolio 5. The fourth risk factor-ratio is negative relation to return in the portfolio 1 and positive in portfolio 3,4 and 5. But the factor-ratio has no significant explanation power of return in portfolio 2.