Indian Journal of Research in Capital Markets

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Impact of Information Asymmetry on Return Volatility – Domestic and Cross-Country Evidence


Affiliations
1 Assistant Professor, School of Business and Management, Christ (Deemed to be University), Bengaluru - 560 076., India
2 Professor and Dean (Acad), Akshara Institute of Management Studies, Savalanga Road, AksharaNagara, Opp. JNNCE, Channamumbapura, Shivamogga - 577 204, Karnataka. (Email : ), India

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This paper aimed at examining the impact of information asymmetry on return volatility in both domestic and cross-country stock market perspectives. For this purpose, secondary data were extracted from BSE 100 index as a domestic stock market index; the Ibovespa, the leading stock index of the Brazilian stock market; IMOEX from the Russian stock market; SSE Composite Index of the Chinese stock market; and FTSE/JSE of the South African stock market for the period from January 2007 – December 2017. To assess the impact of information asymmetry on return volatility, the exponential generalized autoregressive conditional heteroskedasticity model (EGARCH) and Glosten, Jagannathan, and Runkle (GJR-GARCH) models were employed. Test results of GARCH family models showed the presence of information asymmetries in return volatility of all five stock market indices. GJR-GARCH model showed that negative shocks caused more volatility in return and EGARCH evidenced that positive shocks caused more volatility in return due to market anomalies that were experienced during the study period.

Keywords

Cross-country Evidence, Information Asymmetry, Leverage Effect, Return Volatility

JEL Classification : G11, G12, G14, G15, G17

Paper Submission Date : March 15, 2020 ; Paper sent back for Revision : April 20, 2020 ; Paper Acceptance Date : June 15, 2020.

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  • Impact of Information Asymmetry on Return Volatility – Domestic and Cross-Country Evidence

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Authors

Shabarisha N.
Assistant Professor, School of Business and Management, Christ (Deemed to be University), Bengaluru - 560 076., India
J. Madegowda
Professor and Dean (Acad), Akshara Institute of Management Studies, Savalanga Road, AksharaNagara, Opp. JNNCE, Channamumbapura, Shivamogga - 577 204, Karnataka. (Email : ), India

Abstract


This paper aimed at examining the impact of information asymmetry on return volatility in both domestic and cross-country stock market perspectives. For this purpose, secondary data were extracted from BSE 100 index as a domestic stock market index; the Ibovespa, the leading stock index of the Brazilian stock market; IMOEX from the Russian stock market; SSE Composite Index of the Chinese stock market; and FTSE/JSE of the South African stock market for the period from January 2007 – December 2017. To assess the impact of information asymmetry on return volatility, the exponential generalized autoregressive conditional heteroskedasticity model (EGARCH) and Glosten, Jagannathan, and Runkle (GJR-GARCH) models were employed. Test results of GARCH family models showed the presence of information asymmetries in return volatility of all five stock market indices. GJR-GARCH model showed that negative shocks caused more volatility in return and EGARCH evidenced that positive shocks caused more volatility in return due to market anomalies that were experienced during the study period.

Keywords


Cross-country Evidence, Information Asymmetry, Leverage Effect, Return Volatility

JEL Classification : G11, G12, G14, G15, G17

Paper Submission Date : March 15, 2020 ; Paper sent back for Revision : April 20, 2020 ; Paper Acceptance Date : June 15, 2020.


References





DOI: https://doi.org/10.17010/ijrcm%2F2020%2Fv7i2-3%2F154512