Modeling Volatility of Size, Value and Financial Leverage-Sorted Portfolios: Evidence from Egyptian Stock Exchange
Document Type
Article
Publication Date
9-9-2020
Abstract
This paper aims at examining the volatility properties of equity portfolios sorted according to three firm characteristics: size, value and financial leverage. Using daily share prices of the most active stocks listed in the Egyptian stock exchange, we adopt the GJR-GARCH (1, 1)-M model to investigate volatility properties of the daily portfolio returns. The findings indicate that the characteristics-sorted portfolios (CSPs) have different degrees of both volatility clustering and persistence. Moreover, they document the presence of the asymmetric effect, reflecting that bad news have a larger impact on the volatility of the CSPs than the good news, of the same magnitude. However, the conditional variance has insignificant effect on the conditional mean returns across the CSPs. Volatility of most portfolios increases significantly during period of the 2008 financial crisis as well as in the period of the precautionary procedures post the Egyptian revolution in 2011. The findings of the study have important implications to asset pricing modeling and active portfolio strategies.
Recommended Citation
Otaify M. Modeling volatility of size, value and financial leverage-sorted portfolios: Evidence from Egyptian stock exchange. J Public Affairs. 2020;e2369. https:// doi.org/10.1002/pa.2369