This study examines the impact of market-wide volatility on time-varying risk using the heteroscedastic market model with EGARCH (1,1) specification. Using daily sector returns from the Qatar Stock Exchange (QSE) market over the period 2007–2015, we find that in terms of systematic risk, the large sectors are as vulnerable to overall market volatility as the small ones. In addition, the results reveal evidence for asymmetry in time-varying risk due to the impact of market-wide shocks on sector returns. Specifically, we find that market-wide upswings reduce the systematic risk for industrials, while market-wide downswings increase the systematic risk for real estate, telecommunication and transportation. Our modified model survives a battery of robustness checks.
Journal of Emerging Market Finance – SAGE
Published: Aug 1, 2018
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