Conditional volatility and firm size: an empirical analysis of UK equity portfolios

Patricia L. Chelley-Steeley, James M. Steeley

Research output: Contribution to journalArticlepeer-review


The techniques and insights from two distinct areas of financial economic modelling are combined to provide evidence of the influence of firm size on the volatility of stock portfolio returns. Portfolio returns are characterized by positive serial correlation induced by the varying levels of non-synchronous trading among the component stocks. This serial correlation is greatest for portfolios of small firms. The conditional volatility of stock returns has been shown to be well represented by the GARCH family of statistical processes. Using a GARCH model of the variance of capitalization-based portfolio returns, conditioned on the autocorrelation structure in the conditional mean, striking differences related to firm size are uncovered.
Original languageEnglish
Pages (from-to)433-440
Number of pages8
JournalApplied Financial Economics
Issue number6
Publication statusPublished - 1995


  • financial economic modelling
  • firm size
  • volatility
  • stock portfolio returns


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