Author(s): Samuel Tabot Enow
Properties of stock returns have always been an integral aspect in asset allocation and portfolio management. More specifically, the dynamic nature of stock returns, provides nuanced patterns that highlight the inherent complexity of financial markets. The aim of this study was to explore the time varying properties of stock returns in international markets. A GARCH and Chow Test was used for four financial markets from June 04, 2018, to June 04, 2023. The findings revealed that stock returns exhibit time-dependent behaviour, challenging traditional assumptions of constant parameters with distinct phases of volatility clustering, illustrated by periods of heightened market turbulence followed by relative calmness. Additionally, the study revealed a shift in structural breaks which provided valuable insights into the evolving relationships between stock returns. These findings have significant implications for investment strategies, risk management, and financial modelling as recognizing the evolving nature of stock returns allows for more robust portfolio construction and improved decision-making in an ever-changing financial landscape.