Does World-Level Volatility matter for the Average Firm in a Global Equity Market?

• Main Authors: SEQUEIRA, J. M., DONG, Lan
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2003
• Subjects: Variance decomposition; Country effect; Industry effect; Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5035
• Institution: Singapore Management University

Volatility components for an average stock in the global equity market are derived in this study. Using a variance decomposition approach, we obtain a time series of firm-level, global-industry (country) level, and world-level volatility. Each volatility components is found to be time-varying with firm-level volatility being the most important component of aggregate volatility. Our results find no evidence of any trend in firm-level volatility. Interestingly, we also discover that country factors are more important than industry factors in explaining the total variation in international stock returns.