The Impact of Major Event on Regime Switching of Financial Market Volatility Spillover: The Case of the 2011 Japanese Earthquake

Purpose This paper aims to investigate the effect of global financial market uncertainty on the relation between risk and return in G7 stock markets. Design/methodology/approach Market uncertainty is quantified using a probability-based measure derived from a regime-switching model in which the state transition probabilities are time-varying in response to leading economic indicators. Time variation in the risk return relation is estimated using a GARCH-M model. Findings While the regime-switching model successfully distinguishes between crisis and normal states, there remains substantial variability through time in the level of uncertainty about which state prevails. Results show that a strong negative relation exists between this uncertainty and the reward-to-variability ratio across all G7 stock markets. This finding is qualitatively consistent at both monthly and weekly horizons. Originality/value Extant evidence on the risk-return relation is conflicting. Most papers assume the relation is time constant. Allowing the reward-to-variability ratio to vary through time in response to return regime uncertainty increases the understanding of asset pricing. It also has important implications for asset allocation decisions by investors.

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A dynamic markov regime-switching asymmetric GARCH model and its cumulative impulse response function

Afrika Statistika ◽

10.16929/as/2021.2537.173 ◽

2021 ◽

Vol 16 (1) ◽

pp. 2537-2559

Author(s):

Gado SEMA ◽

Mamadou Abdoulaye Konté ◽

Abdou Kâ Diongue

Keyword(s):

Impulse Response ◽

Financial Market ◽

Regime Switching ◽

Impulse Response Function ◽

Garch Model ◽

Market Volatility ◽

Markov Regime Switching ◽

Proposed Model ◽

Asymmetric Garch ◽

Better Than

In this paper, we consider the Markov regime-switching GJR-GARCH(1,1) model to capture both the cumulative impulse response and the asymmetry of the dynamic behavior of financial market volatility in stationary and explosive states. The model can capture regime shifts in volatility between two regimes as well as the asymmetric response to negative and positive shocks. A Monte Carlo simulation is conducted to validate the main theory and find that the regime-switching GJR-GARCH model performs better than the standard GJR-GARCH model. Applications to Brazilian stock market data show that the proposed model performs well in terms of cumulative impulse response.

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COVID-19, Oil Price, Bitcoin, and US Economic Policy Uncertainty: Evidence from ARDL Model

International Journal of Economics and Finance ◽

10.5539/ijef.v13n11p88 ◽

2021 ◽

Vol 13 (11) ◽

pp. 88

Author(s):

Hanan Naser

Keyword(s):

Economic Policy ◽

Financial Market ◽

Global Economy ◽

Positive Impact ◽

Oil Price ◽

Market Volatility ◽

Policy Uncertainty ◽

Economic Policy Uncertainty ◽

The Impact

The pandemic of coronavirus (COVID-19) creates fear and uncertainty causing extraordinary disruption to financial markets and global economy. Witnessing the fastest selloff in the American stock market in history with a plunge of more than 28% in S&P 500 has increased the volatility of global financial market to exceed the level observed during the financial crisis of 2008. On the other hand, Bitcoin value has shown considerable stability in the last couple of months peaking at $10,367.53 in the mid of February 2020. In this context, the aim of this paper is to investigate the impact of COVID-19 numbers on Bitcoin price taking into consideration number of controlling variables including WTI-oil price, S&P 500 index, financial market volatility, gold prices, and economic policy uncertainty of the US. To do so, ARDL estimation has been applied using daily data from December 31, 2019 till May 20, 2020. Key findings reveal that the daily reported cases of new infections have a marginal positive impact on Bitcoin price in the long term. However, the indirect impact associated with the fear of COVID-19 pandemic via financial market stress cannot be neglected. Bitcoin can also serve as a hedging tool against the economic policy uncertainty in the long term. In the short run, while the returns of economic policy uncertainty have no impact on Bitcoin price, the growth in the new cases of COVID-19 infection and returns of financial market volatility have more positive significant impact on Bitcoin returns.

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The Outbreak of COVID-19 Pandemic and Its Impact on Stock Market Volatility: Evidence from a Worst-affected Economy

10.21203/rs.3.rs-57471/v1 ◽

2020 ◽

Author(s):

Debakshi Bora ◽

Daisy Basistha

Keyword(s):

Comparative Analysis ◽

Stock Market ◽

Financial Market ◽

Garch Model ◽

Global Market ◽

Market Volatility ◽

Stock Market Volatility ◽

Bottom Line ◽

Indian Stock Market ◽

The Impact

Abstract The outbreak of COVID-19 has affected the entire global financial market in an unprecedented way. Due to the disruptions that emerged in the global market; the financial market of India also reacted to the pandemic and witnessed sharp volatility. Given the COVID-19 situation, this paper empirically investigates the impact of COVID-19 on the Indian stock market. Using daily closing prices of indices such as Nifty and Sensex, this study examines the volatility of these indices over the period 3rd September 2019 to 10th July 2020. Further, the study has attempted to make a comparative analysis of the return of the stock market in pre-COVID-19 and during the COVID-19 situation. GARCH model is used to capture the volatility of the indices. Findings reveal that the stock market in India has experienced volatility during the pandemic period. While comparing the results with that of the pre-COVID-19 period, we find that return on the indices is higher in the pre-COVID-19 period than during COVID-19. The return of both the stock market reached the bottom line during the first lockdown period, which is from24th March to 6th April.

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The frequency of regime switching in financial market volatility

Journal of Empirical Finance ◽

10.1016/j.jempfin.2015.03.005 ◽

2015 ◽

Vol 32 ◽

pp. 63-79 ◽

Cited By ~ 10

Author(s):

Ahmed BenSaïda

Keyword(s):

Financial Market ◽

Regime Switching ◽

Market Volatility

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COVID-19, Oil Price, Bitcoin, and US Economic Policy Uncertainty: Evidence from ARDL Model

International Journal of Economics and Finance ◽

10.5539/ijef.v13n11p92 ◽

2021 ◽

Vol 13 (11) ◽

pp. 92

Author(s):

Hanan Naser

Keyword(s):

Economic Policy ◽

Financial Market ◽

Global Economy ◽

Positive Impact ◽

Oil Price ◽

Market Volatility ◽

Policy Uncertainty ◽

Economic Policy Uncertainty ◽

The Impact

The pandemic of coronavirus (COVID-19) creates fear and uncertainty causing extraordinary disruption to financial markets and global economy. Witnessing the fastest selloff in the American stock market in history with a plunge of more than 28% in S&P 500 has increased the volatility of global financial market to exceed the level observed during the financial crisis of 2008. On the other hand, Bitcoin value has shown considerable stability in the last couple of months peaking at $10,367.53 in the mid of February 2020. In this context, the aim of this paper is to investigate the impact of COVID-19 numbers on Bitcoin price taking into consideration number of controlling variables including WTI-oil price, S&P 500 index, financial market volatility, gold prices, and economic policy uncertainty of the US. To do so, ARDL estimation has been applied using daily data from December 31, 2019 till May 20, 2020. Key findings reveal that the daily reported cases of new infections have a marginal positive impact on Bitcoin price in the long term. However, the indirect impact associated with the fear of COVID-19 pandemic via financial market stress cannot be neglected. Bitcoin can also serve as a hedging tool against the economic policy uncertainty in the long term. In the short run, while the returns of economic policy uncertainty have no impact on Bitcoin price, the growth in the new cases of COVID-19 infection and returns of financial market volatility have more positive significant impact on Bitcoin returns.

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Quantitative Easing Program and Financial Market Volatility in Indonesia

JEJAK ◽

10.15294/jejak.v10i1.9128 ◽

2017 ◽

Vol 10 (1) ◽

pp. 80-89

Author(s):

T. Muhd. Redha Vahlevi ◽

Harjum Muharam

Keyword(s):

Exchange Rate ◽

Money Supply ◽

Financial Market ◽

Price Volatility ◽

Gold Price ◽

Market Volatility ◽

Series Data ◽

Quantitative Easing ◽

Market Index ◽

The Impact

This research aims to examine the impact of the USD money supply during and before quantitative easing program towards financial market volatility in Indonesia which is proxied by variance of financial market index such as IHSG, Gold Price in IDR, and Exchange Rate IDR/USD to find out the effect of the excess USD money supply on Indonesias financial market volatility. This reseacrh has used monthly time series data of M1 of USD, IHSG, IDR/USD Exchange Rate, and Gold Price from December 2008 to December 2013. TGACRH in this research is used to find out wheter the volatility or variance at previous time affects volatility of these financial market index at present time and assymetric information is exist in the financial market index. The result showed that theres a difference between the effect of USD money supply to financial market index volatility in Indonesia during QE program and before QE program. Before and during QE program, USD money supply positively affects IDR/USD exchange rate volatiliy and IHSG volatility and negatively affects Gold Price volatility. During QE program, USD money supply negatively affects volatility of IDR/USD exchange rate and IHSG, and positively affects Gold Price volatility.

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