The behavior of stock returns in the mining industry following the Iraq war

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Abstract

The aim of this article is to characterize the dynamics of stock returns of 10 leading mining firms over a politically unstable period, marked by 9/11 and the subsequent invasion of Iraq. To that end, we analyze the evolution of return volatility over time, examine the dynamics of volatility persistence, and test for the presence of volatility shifts. We also examine whether volatility and trading volume obey the one-factor mixture-of-distribution hypothesis (MDH). Finally, we analyze whether the performance of mining stock returns may be influenced by the evolution of the energy sector. The results suggest that firms which belong to the same industry did not necessarily exhibit identical patterns of return volatility. Secondly, shocks to volatility and volume are in general dynamically asymmetric, which violates the one-factor MDH. Thirdly, the metals and minerals analyzed exhibited different degrees of dependency on energy prices.

Original languageEnglish
Pages (from-to)274-292
Number of pages19
JournalResearch in International Business and Finance
Volume23
Issue number3
DOIs
StatePublished - Sep 2009

Keywords

  • Mining sector
  • Time reversibility
  • Volatility shifts
  • Wavelets

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