Return Volatility and Macroeconomic Factors: A Comparison of US and Pakistani Firms

  • Sharif Ullah Jan
  • Hashim Khan


This study explores the effect of selected economic factors on stock return volatility along with asymmetry and leverage effects on comparative basis of the New York Stock Exchange (NYSE) and Pakistan Stock Exchange (PSX). These dimensions are further investigated with respect to size and age of the firms. The daily stock returns of all the firms on both NYSE and PSX and macroeconomic factors are considered for the period 2000–2015. The results from GARCH (1, 1) revealed that all the economic factors have proven their significance in determining the stock returns volatility in both the markets with respect to firm’s size and age. More precisely, a negative relationship is observed for market returns (MR), exchange rate (EXR), and oil returns (OIL) with stock return volatility for majority of the firms in both stock markets. Furthermore, risk-free rate (RFR) showed positive and negative effect on the stock return volatility of majority of the firms in NYSE and PSX markets respectively. However, with respect to size and age effects, firms in both the markets exhibited entirely different behavior for all the macroeconomic factors. Further, using EGARCH model, an evidence of asymmetry and leverage effect (with negative coefficient) is found in NYSE and partial evidence (both negative and positive coefficients) in PSX is observed. Again, these results vary with respect to firms’ features in both the markets. Therefore, the results of the current study clearly show that there are significant differences in both markets and the investors can diversify their investments and shape their liquidity positions in both markets in order to exploit the maximum benefits from the market and firms specific factors
How to Cite
JAN , Sharif Ullah; KHAN , Hashim. Return Volatility and Macroeconomic Factors: A Comparison of US and Pakistani Firms . Business & Economic Review, [S.l.], v. 10, n. 2, p. 1-28, june 2018. ISSN 2519-1233. Available at: <>. Date accessed: 22 aug. 2019.