Excess volatility in main emerging and developed stock markets is carefully analysed in this study. Tail distribution of returns of both stock market index and individual stocks is evaluated and compared with the theoretical distribution found by Gabaix et al. (2003, 2006). For stock market index, recursive and rolling estimation are used. In recursive estimation, we find that all the developed markets obey “the Cubic Law of the Stock Returns”, while most of the emerging countries exhibit heavier tail with a tail index lower than 3 at 95% significance level. In rolling estimation, the tail index in the developed markets does not stabilise around 3, and after 2008 financial crisis, all the developed markets and most emerging ones suffer a drop in the tail index. For individual stocks, the tail distributions of stock returns, trading volume, and the number of trades in each emerging country behave quite differently from the theoretical model by Gabaix et al. (2006), especially the stock returns.
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