Equity return dispersion and stock market volatility : evidence from multivariate linear and nonlinear causality tests
Loading...
Date
Authors
Demirer, Riza
Gupta, Rangan
Lv, Zhihui
Wong, Wing-Keung
Journal Title
Journal ISSN
Volume Title
Publisher
MDPI
Abstract
We employ bivariate and multivariate nonlinear causality tests to document causality
from equity return dispersion to stock market volatility and excess returns, even after controlling
for the state of the economy. Expansionary (contractionary) market states are associated with a low
(high) level of equity return dispersion, indicating asymmetries in the relationship between return
dispersion and economic conditions. Our findings indicate that both return dispersion and business
conditions are valid joint forecasters of stock market volatility and excess returns and that return
dispersion possesses incremental information regarding future stock return dynamics beyond that
which can be explained by the state of the economy.
Description
Keywords
Equity return dispersion, Stock market volatility, Business cycle, Multivariate causality
Sustainable Development Goals
Citation
Demirer, R., Gupta, R., Lv, Z. et al. 2019,'Equity return dispersion and stock market volatility : evidence from multivariate linear and nonlinear causality tests', Sustainability, vol. 11, no. 2, a351, pp. 1-15.