The Influence Of Volatility Of Stock Volatility On Stock Returns

Studying stock price volatility has important theoretical and practical significance for risk management and asset pricing.The frequent fluctuation of stock price is one of the distinctive features of securities market,it is directly related to the securities market uncertainty and risk,is the portfolio theory,capital asset pricing model(CAPM),arbitrage pricing model(APT),and Black-Schole option pricing model,and the securities market risk is one of the most concise and effective measures.At the same time,volatility has an important impact on the investment and financing decisions of enterprises and consumer behavior patterns,etc.Therefore,the estimation and prediction of stock market volatility has always been a hot issue in securities market research.China's stock market is an emerging stock market,which has its own characteristics compared with the mature stock market in the world.It is of great significance to study the characteristics of volatility of China's stock market for the development and improvement of China's stock market.In recent years,most researches on volatility focus on idiosyncratic volatility,and few people study the impact of volatility of stock volatility on stock returns.This paper,referring to Guido(2018)'s research,builds an index VOV to describe the volatility of individual stocks.It groups the volatility according to the quinquennial non-method,and compares the income gap between different portfolios by using CAPM model,farm-franch three-factor model,Chart four-factor model and farm-franch five-factor model for further analysis.In terms of the control variables used,we also selected the monthly return rate,market value in circulation and earnings per share.In addition,according to the method of Amihud(2002),the index to measure liquidity is calculated.After the removal of ST stocks,stocks with less than 200 trading days per year from 1994 to 2018,and stocks with less than 90 trading days per year in 2019,the ARCH effect of stocks is analyzed,and the Garch model adapted to the stock situation is further fitted.On this basis,GARCH volatility of each stock is calculated.Subsequently,referring to the volatility calculation formula of stock volatility proposed by Guido.Baltussen(2018),the monthly VOV was calculated for further analysis.In the analysis,the characteristics of stocks grouped according to VOV are firstly studied.The results show that VOV is correlated with the differences in characteristics of different stocks.That is to say,the size of VOV has an influence on the existing factors affecting the stock price.To study the volatility of stock volatility in earnings,the influence of monthly stock according to the size of the VOV is divided into five groups,using the built in turn depict individual stocks volatility of volatility index VOV,according to the method of five points in a group,and use three factor model,CAPM model,the Farm-Franch Chart four factor model,the Farm-Franch five factor model comparison between different combinations of income gap.The empirical results show that no matter which model is adopted for analysis,the returns of each portfolio will decrease with the increase of VOV,that is to say,the returns of the portfolio will decrease with the increase of the volatility of stock volatility.The average annualized income gap is about 4%(3%),and all of them have high statistical significance.After that,three ways are tried to explain the negative effect of VOV.The first method draws on the research of tian lihui and wang guanying(2014)and introduces the volurne and turnover rate.The volume and turnover rate are taken as explained variables,and VOV,beta and other factors are taken as explanatory variables for regression.Fama-mecbench regression was adopted in the selection of regression method.The empirical results show that VOV has a significant positive correlation with turnover rate and trading volume,while there is a negative correlation between turnover rate and expected returns of stocks,which can explain part of the negative effect of VOV.At the same time,we also calculated the change range of turnover and turnover rate,indicating that the increase of VOV will increase the turnover rate of current trading volume and increase the turnover rate of future trading volume and turnover rate.In the second method,the distribution of stock returns is considered,and the negative effect of VOV is proved to be independent of the distribution state of returns through the analysis from the perspectives of cross section and time series.Third,considering whether the negative effect of VOV is caused by the deviation of stock price from its basic value,through empirical analysis,we cannot prove that the negative effect of VOV is caused by the deviation of stock price from its basic value.Finally,considering the influence of robustness,we used the method of market capitalization weighting to repeatedly calculate and investigate whether VOV effect exists.The empirical results show that VOV effect does not depend on the selection of stock market weight.According to the Suggestions of the original text,the relationship between VOV and industry cluster is analyzed.The results show that after controlling the industry factors,the VOV effect is still significant.We also analyze the VOV effect of state-owned listed enterprises and non-state-owned listed enterprises.Innovation in this paper,by constructing A new risk uncertainty-to examine some of stock volatility of stock returns,combined with China's a-share market data will be analyzed,may is less than that,however,failed to find A can fully explain the causes of the formation of VOV effect,it is also can be one of the aspects of in-depth study in the future.