Analysis of the Relationship between Market Volatility and Firms Volatility on the Polish Capital Market

Aneta Włodarczyk, Iwona Otola

DOI: http://dx.doi.org/10.12775/DEM.2016.006

Abstract


In this paper we investigate if the strength of firm-market volatility relationship has changed after subprime crisis on the Polish Capital Market. The empirical study concern the selected companies listed on the Warsaw Stock Exchange (WSE) from the construction and IT sectors in the 2004–2011 period. The volatility measures were computed on the basis of daily low and high prices for companies shares and WIG index. For each company   ARFIMAX-FIGARCH model with additional exogenous variables, which represented market volatility, was estimated in the stable and the turbulent period. Conducted empirical studies have not shown that the negative shocks flowing from the American stock market through investors' behavior channel contributed to the increase in the fraction of firms of the construction and IT sectors listed on the WSE whose volatility is shaped by market volatility.

Keywords


ARFIMAX-FIGARCH; firm volatility; market volatility; subprime crisis; Warsaw Stock Exchange.

Full Text:

PDF

References


Arouri, M., Hammoudeh, S., Lahiani, A., Nguyen, D. (2012), Long Memory and Structural Breaks in Modeling the Return and Volatility Dynamics of Precious Metals, Quarterly Review of Economics and Finance, 52, 207–218, DOI: http://dx.doi.org/10.1016/j.qref.2012.04.004.

Baur, D. (2003), Testing for Contagion – Mean and Volatility Contagion, Journal of Multina-tional Financial Management, 13, 405–422, DOI: http://dx.doi.org/10.1016/S1042-444X(03)00018-5.

Beine, M., Laurent, S., Lecourt, Ch. (2002), Accounting for Conditional Leptokurtosis and Closing Days Effects in FIGARCH Models of Daily Exchange Rates, Applied Financial Economics, 12, 589–600, DOI: http://dx.doi.org/10.1080/09603100010014041.

Bollerslev, T., Mikkelsen, H.O. (1996), Modeling and Pricing Long Memory in Stock Market Volatility, Journal of Econometrics, 73, 157–160, DOI: http://dx.doi.org/10.1016/0304-4076(95)01736-4.

Burzała, M. (2013), Determination of the Time of Contagion in Capital Markets Based on the Switching Model, Dynamic Econometric Models, 13, 69–85, DOI: http://dx.doi.org/10.12775/DEM.2013.004.

Campbell, J.Y., Lettau, M., Malkiel, B., Xu, Y. (2001), Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk, Journal of Finance, 56, 1–43, DOI: http://dx.doi.org/10.1111/0022-1082.00318.

Cavaglia, S., Brightman, C., Aked, M. (2000), The Increasing Importance of Industry Factors, Financial Analysts Journal, 56, 41–54, DOI: http://dx.doi.org/10.2469/faj.v56.n5.2389.

Chen, Y., Lai, K.K. (2013), Examination on the Relationship Between VHSI, HSI and Future Realized Volatility with Kalman Filter, Eurasian Business Review, 3, 200–216, DOI: http://dx.doi.org/10.14208/ebr.2013.03.02.005.

Chuliá, H., Torró, H. (2011), Firm Size and Volatility Analysis in the Spanish Stock Market, The European Journal of Finance, 17, 695–715, DOI: http://dx.doi.org/10.1080/1351847X.2011.554286.

Claessens, S., Forbes, K. (2004), International Financial Contagion: The Theory, Evidence and Policy Implication, https://pdfs.semanticscholar.org/0fda/b705fde6484961e3679cecd41e449721a132.pdf (2.12.2014).

Corsetti, G., Pericoli, M., Sbracia, M. (2005), Some Contagion, Some Interdependence, More Pitfalls in Tests of Financial Contagion, Journal of International Money and Finance, 24, 1177–1199, DOI: http://dx.doi.org/10.1016/j.jimonfin.2005.08.012.

Dungey, M., Fry, R., Gonzalez-Hermosillo, B., Martin, V.L., Tang, Ch. (2011), Contagion and the Transmission of Financial Crisis, in Kolb R.W. (ed.), Financial Contagion: The Viral Threat to the Wealth of Nations, John Wiley & Sons, Inc., Hoboken, New Jersey.

Feurer, R., Chaharbaghi, K. (1994), Defining Competitiveness: A Holistic Approach, Management Decision, 32, 49–58, DOI: http://dx.doi.org/10.1108/00251749410054819.

Fiszeder, P. (2009), Modele klasy GARCH w empirycznych badaniach finansowych (The Class of GARCH Models in Empirical Finance Research), Wydawnictwo UMK, Toruń.

Fiszeder, P., Perczak, G. (2013), A New Look at Variance Estimation Based on Low, High and Closing Prices Taking Into Account the Drift, Statistica Neerlandica, 67, 456–481, DOI: http://dx.doi.org/10.1111/stan.12017.

Giot, P. (2005), Relationships Between Implied Volatility Indexes and Stock Index Returns, The Journal of Portfolio Management, 31, 92–100, DOI: http://dx.doi.org/10.3905/jpm.2005.500363.

Grabowska, M. (2013), Wartość rynkowa oznaką pozycji i przewagi konkurencyjnej przedsiębiorstw, (The Market Value as an Indication of the Position and Competitive Advantage of Enterprises), Zeszyty Naukowe Uniwersytetu Szczecińskiego. Finanse, Rynki Finansowe, Ubezpieczenia (Scientific Journal of the University of Szczecin, Finance, Financial Markets, Insurance), 786 (64/1), 147–155.

Griffin, J.M., Karolyi, G.A. (1998), Another Look at the Role of the Industry Structure of Markets for International Diversification Strategies, Journal of Financial Economics, 50, 351–373, DOI: http://dx.doi.org/10.1016/S0304-405X(98)00041-5.

Hosking, J.R.M. (1981), Fractional Differencing, Biometrika, 68, 165–176, DOI: https://doi.org/10.1093/biomet/68.1.165.

Kang, S. H., Yoon, S. M. (2012), Dual Long Memory Properties with Skewed and Fat-Tail Distribution, International Journal of Business and Information, 7, 225–249.

Karolyi, A. (2001), Why Stock Return Volatility Really Matters, Strategic Investor Relations, Institutional Investor Journals Series, http://bryongaskin.net/education/MBA%20track/Current/MBA611/Assignments/Project/WhyVolatilityMatters.pdf (15.10.2014).

Konopczak, M., Sieradzki, R., Wiernicki, M. (2010), Kryzys na światowych rynkach finansowych–wpływ na rynek finansowy w Polsce oraz implikacje dla sektora realnego (Global Financial Markets Crisis – Impact on the Polish Fnancial Market and Implications for the Real Sector of the Economy), Bank i Kredyt (Bank and Credit), 41, 45–70.

Krysicki, W., Bartos, J., Dyczka, W., Królikowska, K., Wasilewski, M. (2012), Rachu-nek prawdopodobieństwa i statystyka matematyczna w zadaniach, (Probability and Mathematical Statistics in Exercises), Part 2, PWN, Warsaw.

Laurent, S. (2013), Estimating and Forecasting ARCH Models Using G@RCH 7, Timberlake Consultants Ltd, London.

Le, C., David, D. (2014), Asset Price Volatility and Financial Contagion Analysis Using the MS-VAR Framework, Eurasian Economic Review, 4,133–162, DOI: http://dx.doi.org/10.1007/s40822-014-0009-y.

Molnár, P.(2012), Properties of Range-based Volatility Estimators, International Review of Financial Analysis, 23, 20–29, DOI: http://dx.doi.org/10.1016/j.irfa.2011.06.012.

Otola, I. (2013), Procesy zarządzania przedsiębiorstwami a konkurencyjność w warunkach zarażonego rynku (The Management Processes of Enterprises and Competiveness under Condition of Market Contagion), Wydawnictwo Politechniki Częstochowskiej, Częstochowa.

Peng, Y., Ng, W. (2012), Analysing Financial Contagion and Asymmetric Market Dependence with Volatility Indices via Copulas, Annals of Finance, 8, 49–74, DOI: http://dx.doi.org/10.1007/s10436-011-0181-y.

Phylatkis, K., Xia, L. (2009), Equity Market Comovement and Contagion: A Sectoral Perspective, Financial Management, 38, 381–409, DOI: http://dx.doi.org/10.1111/j.1755-053X.2009.01040.x.

Sadigue, S., Silvapulle, P. (2011), Long-term Memory in Stock Market Returns: International Evidence, International Journal of Finance and Economics, 6, 59–67, DOI: http://dx.doi.org/10.1002/ijfe.143.

Sequeira, J.M., Lan, D. (2003), Does World-level Volatility Matter for the Average Firm in a Global Equity Market?, Journal of Multinational Financial Management, 13, 341–357, DOI: http://dx.doi.org/10.1016/S1042-444X(03)00015-X.

Sharma, S.S., Narayan, P.K., Zheng, X. (2011), An Analysis of Firm and Market Volatility, An Financial Econometrics Series, SWP 2011/02, Deakin University, Australia, https://core.ac.uk/download/pdf/6266325.pdf (12.06.2012).

Sharma, S.S., Narayan, P.K., Zheng, X. (2014), An Analysis of Firm and Market Volatility, Economic Systems, 38, 205–220, DOI: http://dx.doi.org/10.1016/j.ecosys.2013.12.003.

Shin, H.H., Stulz, R.M. (2000), Firm Value, Risk and Growth Opportunities, NBER Working Paper 7808, http://www.nber.org/papers/w7808.pdf (2.03.2015).

Simon, D.P. (2003), The Nasdaq Volatility Index During and After the Bubble, The Journal of Derivatives,11, 9–24, DOI: http://dx.doi.org/10.3905/jod.2003.319213.

Whaley, R.E. (2009), Understanding the VIX, Journal of Portfolio Management, 35, 98–105, DOI: http://dx.doi.org/10.3905/jpm.2009.35.3.098.

Włodarczyk, A. (2010), Testowanie efektu długiej pamięci w zmienności cen metali szlachetnych (Testing for Long Memory in Volatility of Precious Metal Prices), Roczniki Naukowe. Seria B, Nauki Ekonomiczne i Informatyka (Scientific Annals. Series B, Economic Science and Informatics), 1–2, 151–170.






ISSN (print) 1234-3862
ISSN (online) 2450-7067

Partnerzy platformy czasopism