[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
  EconPapers    
Economics at your fingertips  
 

Have European Stocks Become More Volatile? An Empirical Investigation of Idiosyncratic and Market Risk in the Euro Area

Colm Kearney and Valerio Potì

The Institute for International Integration Studies Discussion Paper Series from IIIS

Abstract: We examine the dynamics of idiosyncratic risk, market risk and return correlations in European equity markets using weekly observations from 3515 stocks listed in the 12 Euro area stock markets over the period 1974-2004. Similarly to Campbell, Lettau, Malkiel and Xu (2001), we find a rise in idiosyncratic volatility, implying that it now takes more stocks to diversify away idiosyncratic risk. Contrary to the United States , however, market risk is trended upwards in Europe and correlations are not trended downwards. Both the volatility and correlation measures are pro-cyclical, and they rise during times of low market returns. Market and average idiosyncratic volatility jointly predict market wide returns, and the latter impact upon both market and idiosyncratic volatility. This has asset pricing and risk management implications.

Keywords: Idiosyncratic risk; correlation; portfolio management; asset pricing (search for similar items in EconPapers)
Date: 2006-05-23
New Economics Papers: this item is included in nep-cfn, nep-eec, nep-fin, nep-fmk and nep-rmg
Note: Length:
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.tcd.ie/triss/assets/PDFs/iiis/iiisdp132.pdf (application/pdf)

Related works:
Journal Article: Have European Stocks become More Volatile? An Empirical Investigation of Idiosyncratic and Market Risk in the Euro Area (2008) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iis:dispap:iiisdp132

Access Statistics for this paper

More papers in The Institute for International Integration Studies Discussion Paper Series from IIIS 01. Contact information at EDIRC.
Bibliographic data for series maintained by Maeve ().

 
Page updated 2025-02-10
Handle: RePEc:iis:dispap:iiisdp132