Stock returns and conditional risk : an empirical investigation of the Amman stock exchange

Abstract EN

This study investigates the relationship between expected returns and conditional volatility in the Amman Stock Exchange (ASE) during the period from January 2, 1992 to January 2, 2001.

The investigation employs daily price data from the ASE general index and its four industry-classified indices.

These four indices are: Banking, Insurance, Services, and Industry.

Using three specifications for the GARCH-M model, our results clearly indicate that conditional volatility is a prime feature of daily returns behaviour of these indices.

Moreover, the expected returns are shown to have had a positive relationship with time-varying volatility for all indices.

However, the only statistically significant relationship is present in the services index.