Research on Return-Volatility Relationship Based on Dynamic Panels from the Perspective of Firm Level in China's Stock Market

Abstract

Abstract:

Using the sample stocks of the CSI 800 panel data in Chinese stock market, we establish a dynamic panel vector autoregressive model to explore the relationship between return and volatility from the perspective of firm level and examine both of the market and firm factors in "leverage" and volatility feedback effects. The results show that "leverage" and volatility feedback effects both exist in China's stock market and the leverage effect is more dominant. Market factor in leverage effect produces positive effect, showing the reverse leverage while firm factor is significant and negative, but not dominant in a short time. As for volatility feedback effect, market and firm factors are both negative and the market factor is stronger than the firm factor. We also find that large firms with good solvency and high profitability have a high degree of information disclosure. Their asymmetric effects are mainly affected by market factor, while the firm factor is not that remarkable. This research can provide necessary references and reasonable proposals for the investment and regulation.

Key words: firm level perspective, dynamic panel, return, leverage effect, volatility feedback effect

Wang Chunfeng, Huang Ning, Fang Zhenming. Research on Return-Volatility Relationship Based on Dynamic Panels from the Perspective of Firm Level in China's Stock Market[J]. , 2016, 28(4): 3-11.

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