Open AccessEconomic Forces and Firm Stock Returns Volatility: Role of Firm Features
Author(s) -
Muhammad Saqib Bashir Butt,
Hasniza Mohd Taib
Publication year - 2019
Publication title -
pakistan journal of humanities and social sciences
Language(s) - English
Resource type - Journals
eISSN - 2709-801X
pISSN - 2415-007X
DOI - 10.52131/pjhss.2019.0703.0087
Subject(s) - volatility (finance) , spurious relationship , stock (firearms) , economics , firm offer , stock market , financial economics , monetary economics , econometrics , business , industrial organization , mechanical engineering , paleontology , horse , machine learning , computer science , engineering , biology
Stock market volatility is always been a major concern for investors, regulators, policy makers and academicians. Unfortunately, firm level volatility has not been given the due attention. The studies dealing with the firm level volatility are scarce. Moreover, a common assumption of homogenous nature of firms is used in the aggregate stock market analysis, sectoral level analysis and even in a firm level analysis. This homogenous assumption was objected by several researchers and suggested that firms are heterogeneous even in a narrowly defined sector. Furthermore, firms are different from each other because of possessing different characteristics. Based on that firm’s response to macroeconomic changes would not be the same. Hence, the hypothesis testing ignoring this fact could be spurious. This study proposes five categories in which firms can be classified, such as firm age, firm size, firm nature of business, firm trading nature and the sectoral location of the firm. This study proposes to examine the linkages between the macro economic factors and the firm level stock returns volatility considering the given firm features. It is expected from the empirical testing that the macroeconomic factors effect firm stock returns volatility belonging to different firm features differently, both in terms of magnitude and sign.