Variation in Stock Return Risks: An International Comparison

Variation in Stock Return Risks: An International Comparison Using returns of 4,916 stocks from 22 developed countries and 15 developing countries, this study examines the relative magnitude of conditional volatility and the international market systematic risk of stock prices in countries at different developmental stages and in various geographical areas. Consistent with the finding of Bekaert et al. (2008), the results of non-parametric Mann-Whitney tests suggest that the stock prices in emerging markets are riskier than the ones in developed countries, measured by both conditional volatility and global beta. Our empirical findings also support the geographical variation in stock risks. Specifically, the equity values in Southeast Asia, South Europe, and Latin America are more volatile than the rest of the world. Similar results can be found in the country-level tests. The time-series analysis suggests that the stock returns in high risk countries tend to be less volatile but the conditional volatility of stock return in less risky countries leans to increase. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Pacific Basin Financial Markets and Policies World Scientific Publishing Company

Variation in Stock Return Risks: An International Comparison

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Publisher
World Scientific Publishing Company
Copyright
Copyright ©
ISSN
0219-0915
eISSN
1793-6705
D.O.I.
10.1142/S0219091509001666
Publisher site
See Article on Publisher Site

Abstract

Using returns of 4,916 stocks from 22 developed countries and 15 developing countries, this study examines the relative magnitude of conditional volatility and the international market systematic risk of stock prices in countries at different developmental stages and in various geographical areas. Consistent with the finding of Bekaert et al. (2008), the results of non-parametric Mann-Whitney tests suggest that the stock prices in emerging markets are riskier than the ones in developed countries, measured by both conditional volatility and global beta. Our empirical findings also support the geographical variation in stock risks. Specifically, the equity values in Southeast Asia, South Europe, and Latin America are more volatile than the rest of the world. Similar results can be found in the country-level tests. The time-series analysis suggests that the stock returns in high risk countries tend to be less volatile but the conditional volatility of stock return in less risky countries leans to increase.

Journal

Review of Pacific Basin Financial Markets and PoliciesWorld Scientific Publishing Company

Published: Jun 1, 2009

Keywords: Conditional volatility international market systematic risk GARCH Mann-Whitney test JEL Classification: C12 JEL Classification: F36 JEL Classification: G15

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