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Determinants of Stock Price Volatility: A Literature Review


Ranil Hewamana ,

Wayamba University of Sri Lanka, LK
About Ranil
Department of Banking & Finance
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Dinesha Siriwardhane,

University of Sri Jayewardenepura, LK
About Dinesha
Department of Business Economics
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Ananda Rathnayake

University of Sri Jayewardenepura, LK
About Ananda
Department of Business Economics
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Purpose: This paper reviews the theoretical background and the empirical results of the stock price volatility determinants under three categories: macroeconomic, company-specific fundamentals, and behavioral factors.


Methodology: Previous empirical and theoretical articles on volatility determinants were compared to identify the similarities and differences of the findings. The systematic literature review followed to review the articles published in English between 1930 and 2021.


Design: A critical literature review was performed by comparing the findings of previous studies based on the development status of the market. We discuss determinants of stock price volatility. Determinants include behavioral (non-fundamental) factors and macro-economic factors such as GDP, Inflation, Interest Rate, Money Supply, and Exchange Rate. In addition to Earnings and Dividend Payments have been considered under company-specific fundamentals.


Findings: It was found that there is no agreement between the studies on the macro-level and micro-level determinants of stock volatility. This empirical inconsistency is substantial in GDP, Inflation, Money Supply, Exchange Rate, Earnings, and Dividend Payments. The interest rate is the only determinant that shows moderate inconclusive empirical results. However, behavioral determinants appear to be significance consistency in determining the stock price volatility.


Originality: This article reviews the theoretical and empirical background of stock volatility determinants since there is no single article for reviewing theoretical and empirical results. In a single paper, we provide evidence relating to the impact of macroeconomic, company-specific, and behavioral factors on stock price volatility.


Research Directions – Future research is needed to examine the reason for empirical inconsistency in volatility determinants. A systematic literature review is essential.
How to Cite: Hewamana, R., Siriwardhane, D., & Rathnayake, A. (2022). Determinants of Stock Price Volatility: A Literature Review. South Asian Journal of Finance, 2(1), 28–55. DOI:
Published on 21 Jun 2022.
Peer Reviewed


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