Predicting severe simultaneous bear stock markets using macroeconomic variables as leading indicators

2015 ◽  
Vol 13 ◽  
pp. 196-204 ◽  
Author(s):  
Shue-Jen Wu ◽  
Wei-Ming Lee
Keyword(s):  
Stock Markets ◽  
Leading Indicators ◽  
Macroeconomic Variables

scholarly journals Impact of Macroeconomic Variables on Stock Return Volatility: Evidence from Sub-Sahara Africa

2020 ◽  
Vol 4 (2) ◽  
Author(s):  
Peter Ifeanyichukwu Ali ◽  
Samuel M. Nzotta ◽  
A. B. C. Akujuobi ◽  
Chilaka E. Nwaimo
Keyword(s):  
South Africa ◽  
Stock Market ◽  
Stock Markets ◽  
Inflation Rate ◽  
Return Volatility ◽  
Macroeconomic Variables ◽  
Market Return ◽  
Stock Market Return ◽  
Macroeconomic Indicators ◽  
The Impact

The main purpose of this paper was to investigate the impact of macroeconomic variables on stock market return volatility in Sub-Sahara markets. The study concentrated on three stock markets including Ghana, Nigeria and South Africa using GARCH-X (1,1) model on monthly data from January 2000 to December 2017. Preliminary analyses from descriptive statistics show that show mean monthly returns are positive for all the stock markets. Skewness coefficients show that the stock returns and interest rates distribution of all Sub-Sahara Africa stock markets are negatively skewed but inflation rate is positively skewed for Nigeria and South Africa, and flat for Ghana. Excess kurtoses are positive for all the stock markets and macroeconomic indicators, and Jarque-Bera statistics indicate the stock markets’ series and macroeconomic indicators are not normally distributed. The Unit roots tests results indicate that all the stock markets and macroeconomic indicators are first difference stationary. The results of the GARCH-X (1,1) model show that macroeconomic variables do not significantly impact stock market returns volatility in Nigeria, Ghana and South Africa at the 5% significance Level. We therefore recommend that stock market regulators, market participants and investors should concentrate more efforts on other macroeconomic variables aside interest rate and inflation rate, in estimating stock market return volatility in Sub-Sahara Africa.

scholarly journals Impact of Macroeconomic Variables on Stock Market Indices Value: A Cross-Country Indices Study

2013 ◽  
Vol 12 (3) ◽  
pp. 65-76 ◽  
Author(s):  
Rohini Mariappan ◽  
Nikita Hari
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Stock Markets ◽  
Economic Activity ◽  
Contagion Effect ◽  
Macroeconomic Variables ◽  
The World ◽  
Cross Country

Complete unpredictability and the contagion effect of stock markets could pose significant challenges for the entire financial markets of the world. Moreover, it is an incontrovertible truth that the variations in stock market indices is an integral part of the dynamics of economic activity and can propel social moods and expectations. In fact, the stock market has predicted 10 out of the last 3 recessions.

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

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

scholarly journals Vulnerability Analysis of Macroeconomic Indicators for Early Detection of Currency Crisis: Case Study of Indonesian Economy on 1991–2019

2021 ◽  
pp. 2150006
Author(s):  
Hadi Sutrisno ◽  
Dyah Wulansari ◽  
Rossanto Dwi Handoyo
Keyword(s):  
Signal Analysis ◽  
Currency Crisis ◽  
Threshold Value ◽  
Analysis Approach ◽  
Leading Indicators ◽  
Exchange Market ◽  
Macroeconomic Variables ◽  
Macroeconomic Indicators ◽  
Market Pressure

The purpose of this study is to detect the currency crisis in Indonesia by exploring the vulnerability of macroeconomic variables. The Exchange Market Pressure Index was used to determine the crisis period by modeling the threshold value. Early indicators were determined using the signal analysis approach; therefore, the vulnerability level of each macroeconomic variable is known and used to determine the leading indicators. The result showed that the Signal Analysis and Herrera–Garcia approaches are the best detection models. Furthermore, it was concluded that the Signal Analysis approach was better in detecting crises compared to the Herrera–Garcia approach.

An Econometric Analysis of Linkages between Macroeconomic Variables and Stock Markets: Evidence from Asian Emerging Markets

GIS Business ◽  
2018 ◽  
Vol 13 (5) ◽  
pp. 21-30
Author(s):  
Risha Khandelwal
Keyword(s):  
Emerging Markets ◽  
Interest Rates ◽  
Stock Returns ◽  
Granger Causality ◽  
Stock Markets ◽  
Unit Root Test ◽  
Granger Causality Test ◽  
Causality Test ◽  
Macroeconomic Variables ◽  
Study Results

The purpose of this paper is to investigate impact of macroeconomic variables on stock markets of India and Indonesia. This paper also attempts to identify linkages between markets and macroeconomic variables. The rationale behind selecting these countries for the present study is MSCI emerging markets index of Asia, which comprises emerging economies with huge return potential for prospective investors. This study will help investors and researchers to understand dynamics of linkages between markets and macroeconomic variables. Augmented Dickey-Fuller (ADF) unit root test is used to assess the stationary of time series, Johansen test co-integration is applied to examine long-term integration among variables, Granger causality test is used to examine the causality relationship between macroeconomic variables and stock returns. The monthly data are taken for the study which ranges from July 1997 to July 2017. Currency exchange rates, interest rates, money supply, and inflation are the macroeconomic variables for the current study. Results revealed that there is one co-integrating equation of long-run equilibrium between the variables for both countries. Granger causality test reveals that there exists unidirectional and bidirectional relationship between the variables.

Macroeconomic variables for predicting bear stock markets of Taiwan and China

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tran Van Phuong Duong ◽  
Szu-Hsien Lin ◽  
Huei-Hwa Lai ◽  
Tzu-Pu Chang
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Foreign Currency ◽  
Real Exchange Rates ◽  
Currency Reserve ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Bear Markets ◽  
Reserve Growth ◽  
The Impact

PurposeThis research examines how macroeconomic variables can precisely predict bull/bear stock markets in China and Taiwan.Design/methodology/approachThis paper adopts a two-state Markov switching model to characterize the bull and bear markets spanning from 1994 to 2019 and then conduct a bear stock market predictability test by running regressions between the filtered probabilities of bear markets and a series of macroeconomic variables in turn at different horizons of 1, 3, 6, 12 and 24 months.FindingsThis paper shows that inflation rates, changes in real exchange rates, and foreign currency reserve growth are key predictors of bear markets in China, while term spreads, unemployment rates and foreign reserve growth are major factors that can predict bear markets in Taiwan. Remarkably, industrial production growth does not have predictive power for bear markets, which may suggest emerging markets are driven by fund flows rather than real economic activities. Besides, the impact directions of foreign currency reserve growth are opposite, which may be due to different proportions of the financial accounts in their balance of payments.Practical implicationsIn practical respect, this paper provides market participants the usefulness, impact direction and implications of bear market predictors when building their market-timing strategies in China and Taiwan stock markets. The government institutions may also thereby make appropriate policies to prevent huge stock market downturns and serious drawbacks.Originality/valueIt highlights the “fund-driven market hypothesis” and “foreign currency reserve effects” that commonly dominate Taiwan and China stock markets since both are highly affected by international funds.

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