Large and Small Cap Stocks in Europe: Covariance Asymmetry, Volatility Spillovers and Beta Estimates
Several studies show that small cap returns tend to behave differently from large cap returns (Banz, 1981; Chan and Chen, 1991). This fact suggests that diversifying into small cap stocks might improve portfolio performance. In fact, the main empirical evidence on small cap returns shows that small caps distinguish themselves from large caps due to economic and market related characteristics (for a literature review on this topic see Petrella, 2005).
KeywordsStock Return Conditional Volatility Volatility Spillover Multivariate GARCH Model Asymmetric Volatility
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