Global equity market volatility forecasting: New evidence

This paper is concerned with identifying Granger causality in the volatilities of returns between the Australian equity and debt markets. Using a bivariate stochastic volatility model previously described by Yu and Renate (2006), we estimate and compare four causal models between equity market volatility, and the short term and long term debt market volatilities. The causal models are compared with two non-causal, bivariate stochastic volatility models. Models comparisons are performed using the Deviance Information Criteria (DIC). Modelling results suggest that bond market volatility Granger causes equity market volatility. Equity volatility and money market volatility show evidence of Granger causality between the two, but no dominate causal direction is identified suggesting causal feedback between the two market volatilities.

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The role of monetary policy uncertainty in predicting equity market volatility of the United Kingdom: evidence from over 150 years of data

Economics and Business Letters ◽

10.17811/ebl.8.3.2019.138-146 ◽

2019 ◽

Vol 8 (3) ◽

pp. 138 ◽

Cited By ~ 2

Author(s):

Rangan Gupta ◽

Mark Wohar

Keyword(s):

Monetary Policy ◽

United Kingdom ◽

Equity Market ◽

Market Volatility ◽

Policy Uncertainty ◽

Stock Market Volatility ◽

The United Kingdom ◽

Out Of Sample ◽

Key Factor ◽

Risk Free Rate

Theory suggests a strong link between monetary policy rate uncertainty and equity return volatility, since asset pricing models assume the risk-free rate to be a key factor for equity prices. Given this, our paper uses historical monthly data for the United Kingdom over 1833:01 to 2018:07, to show that monetary policy uncertainty increases stock market volatility within sample. In addition, we show that the information on monetary policy uncertainty also adds value to forecasting out-of-sample equity market volatility.

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Expectations or macroeconomic innovations: What drives the stakeholders’ decisions? Evidence from the euro area

Corporate Ownership and Control ◽

10.22495/cocv12i3c1p6 ◽

2015 ◽

Vol 12 (3) ◽

pp. 185-189

Author(s):

S. Ali Shah Syed ◽

Hélène Syed Zwick

Keyword(s):

Interest Rate ◽

Stock Returns ◽

Euro Area ◽

Stock Markets ◽

Empirical Relationship ◽

Equity Market ◽

Monthly Data ◽

Macroeconomic Variables ◽

Long Run ◽

New Evidence

This study brings new evidence supporting the existence of the linkage between equity market and macroeconomic variables in the Euro area. Using the monthly data from January 1999 to September 2014 we show empirical relationship between stock returns and interest rate in the 19 countries using the euro. The results confirm that in Euro Area stock markets, the stockowners decisions are significantly influenced by the macroeconomic expectations, particularly the long run interest rate

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