Abstract
In recent years, understanding the volatility has become more significant among investors. They are concerned about the risk and returns on their investment. Investors are basically induced by the flow of information which is closely related with volatility of stock prices. This study intends to understand the characteristics of volatility with the evidence from survey of literatures made available. This study also provides the insight of cause and effect of volatility of stock prices and also attempts to bring out various features of volatility such as volatility clustering, mean reversion and degree of volatility persistence. It is found that factors like information flow, trading volume, economical aspects and investor’s behaviour are the causes of volatility in the stock market. It also suggests that the stock markets around the world have evidenced asymmetry response and spillover effects of volatility. DOI: 10.5901/mjss.2016.v7n1p208
Highlights
The importance of understanding the behaviour of volatility in stock market has received significant attention among researchers and analysts
The present study provides the insight of cause and effect of volatility of stock prices in the market
Bose (2007) examined the characteristics of return volatilities and suggests that Volatility clustering means the large changes of prices for a period are more likely to be followed by further large changes, the high volatility tend to preceding for a while after the initial shock and a period of low volatility is likely to follow small changes
Summary
In recent years, understanding the volatility has become more significant among investors. They are concerned about the risk and returns on their investment. Investors are basically induced by the flow of information which is closely related with volatility of stock prices. This study provides the insight of cause and effect of volatility of stock prices and attempts to bring out various features of volatility such as volatility clustering, mean reversion and degree of volatility persistence. It is found that factors like information flow, trading volume, economical aspects and investor’s behaviour are the causes of volatility in the stock market. It suggests that the stock markets around the world have evidenced asymmetry response and spillover effects of volatility
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