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Volatility analysis of returns and risk: Family versus nonfamily firms

1 DEGEIT-Department of Economics, Management, Industrial Engineering and Tourism; GOVCOPP-Research Unit of Investigation in Governance, Competitiveness and Public Finances; University of Aveiro, Campus Universitário de Santiago, 3810-193 Aveiro, Portugal
2 ISCA-Instituto Superior de Contabilidade e Administração, University of Aveiro; GOVCOPP- Research Unit of Investigation in Governance, Competitiveness and Public Finances; R. Associação Humanitária dos Bombeiros Voluntários de Aveiro, 3810-500 Aveiro, Portugal

Special Issues: Volatility of Prices of Financial Assets

Family firms (FF) tend to be classified as less risky and volatile than nonfamily firms (NFF). This article aims to examine whether there are differences in risk and volatility between FF and NFF, using Portuguese listed firms during 2008 and 2017. Through different models and specifications, we were able to verify that there exists a positive relationship identified in the volatility-return nexus which depends on the model used, and even so, negative in the case of FF, but that volatility is stronger in NFF than in FF as descriptive statistics reveal. Furthermore, it was found no considerable differences in terms of the liquidity-volatility relationship between the two types of firms, and we cannot argue that the negative relationship between returns and turnover is higher in NFF.
It was also found that more illiquid stocks have negative returns but there are no clear differences between FF and NFF. The crisis effect is more able to explain volatility positively than returns negatively, being the impact lower for NFF. Our results do not strictly confirm the fact that FF are less volatile than NFF but provided variables interaction effects we may argue that a risk-averse investor will be more prone to invest in FF stocks, while a risk lover agent will prefer to look at NFF when building their investment portfolios.
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