Impacts of COVID-19 on financial markets: from the perspective of financial stress

2021 ◽  
pp. 1-5
Author(s):  
Xiaoyang Yao ◽  
Jianfeng Li ◽  
Zezhong Shang ◽  
Wei Le ◽  
Jianping Li
Keyword(s):  
Financial Markets ◽  
Financial Stress

The COVID-19 and bond spreads

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Rui Esteves ◽  
Nathan Sussman
Keyword(s):  
Financial Crisis ◽  
Financial Markets ◽  
Emerging Economies ◽  
Explanatory Power ◽  
Financial Stress ◽  
International Financial Crisis ◽  
Bond Spreads

AbstractFinancial markets reacted with a vengeance to the COVID-19 pandemic. We argue that while the spread of the pandemic is statistically significant in explaining changes to bond spreads, it has little additional explanatory power over variables that capture financial stress. Financial markets reacted as in any international financial crisis by penalizing emerging economies exposing existing vulnerabilities. This finding highlights the need for credible, but flexible, sovereign currencies and the need to build up liquidity reserves.

Financial markets and the working class in the USA: an empirical investigation of financial stress

2019 ◽  
Vol 43 (4) ◽  
pp. 867-890 ◽  
Author(s):  
Michael J McCormack
Keyword(s):  
Working Class ◽  
Financial Markets ◽  
Financial Stress ◽  
Safety Net ◽  
Stress Index ◽  
Survey Of Consumer Finances ◽  
Consumer Finances ◽  
The Usa ◽  
Financial Stress Index ◽  
The Relationship

AbstractThis paper investigates the relationship between financial stress and the working class in the USA. Employing a financial stress index created from the Survey of Consumer Finances, I show that working class households are nearly twice as likely to be financially stressed than wealthier non-working class households from 1992 to 2016. A possible explanation of this result could be that the financial expropriation of personal income among the working class has the effect of increasing that group’s financial stress relative to wealthier classes. Working class households in the USA have struggled to afford means of subsistence in lieu of lacklustre wage growth and a tattered safety net. Financial expropriation of these households has operated in tandem with this precarity, increasing financial stress in a time of financialised capitalism.

scholarly journals The Spillover and Transmission of Chinese Financial Markets Risk

2018 ◽  
Vol 11 (8) ◽  
pp. 66
Author(s):  
Sha Zhu
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Financial Markets ◽  
Financial Market ◽  
Spillover Effect ◽  
Financial Stress ◽  
Stress Index ◽  
2008 Financial Crisis ◽  
The Us ◽  
Financial Stress Index

After the 2008 financial crisis, the whole world financial markets became more fluctuates, the same to China also. It is necessary to pay great attention to high volatility problem in Chinese market, and also the uncertainty problem, risk accumulation and spillover effect come along with it. This paper calculates stock market return and builds financial stress index to explore the risk spillover effect. Empirical results show that the Chinese financial market have higher volatility than other countries. The Chinese stock market had higher dynamic market co-movement with international financial markets after 2008 financial crisis. What’s more, this article also finds the financial risk spreads between China and US. When the US financial stress index increases, China's financial stress index experiences a larger increase. However, after the change in China's financial stress index, the US financial stress index has no obvious trend of change. So we should pay more attention to periods of Chinese financial market risk and its spillover.

FINANCIAL STRESS IN ASEAN-5 ECONOMIES FROM THE ASIAN CRISIS TO THE GLOBAL CRISIS

2012 ◽  
Vol 57 (02) ◽  
pp. 1250013 ◽  
Author(s):  
BOON HWA TNG ◽  
KIAN TENG KWEK ◽  
ANDREW SHENG
Keyword(s):  
Principal Component Analysis ◽  
Financial Markets ◽  
Equity Markets ◽  
Financial Stress ◽  
Principal Component ◽  
International Markets ◽  
Asian Crisis ◽  
Predominant Role ◽  
Global Crisis ◽  
Stress Indices

We construct four market-specific Financial Stress Indices (FSIs) and overall FSIs for the ASEAN-5 economies from 1997 to 2009. Using the FSIs, we establish stylized features of financial stress and characterize the connectivity of financial markets. The results show that stress was most severe during the Asian Crisis, followed by the Tech Burst and the recent Global Crisis. Principal component analysis (PCA) demonstrates that regional connectivity is strongest in equity markets, implying their predominant role in the transmission of stress within the region. Meanwhile, Singapore possesses the lowest connectivity within the ASEAN cluster, but the highest to international markets.

Financial stress effects on financial markets: dynamic connectedness and portfolio hedging

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Taicir Mezghani ◽  
Mouna Boujelbène-Abbes
Keyword(s):  
Financial Markets ◽  
Financial Stress ◽  
Bond Markets ◽  
Conditional Correlation ◽  
Content Type ◽  
Time Frequency ◽  
Oil Market ◽  
Optimal Weights ◽  
Hedging Strategies ◽  
The Impact

PurposeThis paper investigates the impact of financial stress on the dynamic connectedness and hedging for oil market and stock-bond markets of the Gulf Cooperation Council (GCC).Design/methodology/approachThis study uses the wavelet coherence model to examine the interactions between financial stress, oil and GCC stock and bond markets. Second, the authors apply the time–frequency connectedness developed by Barunik and Krehlik (2018) so as to identify the direction and scale connectedness among these markets. Third, the authors examine the optimal weights, hedge ratio and hedging effectiveness for oil and financial markets based on constant conditional correlation (CCC), dynamic conditional correlation (DCC) and Baba-Engle-Kraft-Kroner (BEKK)-GARCH models.FindingsThe authors have found that the correlation between the oil and stock-bond markets tends to be stable in nonshock periods, but it evolves during oil and financial shocks at lower frequencies. Moreover, the authors find that the oil market and financial stress are the main transmitters of risks. The connectedness is mainly driven by the long term, demonstrating that the markets rapidly process the financial stress spillover effect, and the shock is transmitted over the long run. Optimal weights show different patterns for each negative and positive case of the financial stress index. In the negative (positive) financial stress case, investors should have more oil (stocks) than stocks (oil) in their portfolio in order to minimize risk.Originality/valueThis study has gone some way toward enhancing one’s understanding of the time–frequency connectedness between the financial stress, oil and GCC stock-bond markets. Second, it identifies the impact of financial stress into hedging strategies offering important insights for investors aiming at managing and reducing portfolio risk.

Is a Japanese yen a safe haven? Relationship between Japanese currency and financial market uncertainty

2021 ◽  
Author(s):  
Katarzyna Czech ◽  
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Financial Market ◽  
Financial Stress ◽  
Sudden Increase ◽  
Market Uncertainty ◽  
Carry Trade ◽  
Safe Haven ◽  
Low Interest Rates ◽  
Japanese Yen

Japan's low-interest rates made the country's currency the primary funding currency in carry trade speculative strategies. Investors' activity in carry trade strategies has an enormous impact on the foreign exchange market volatility. A large inflow of capital to countries with higher interest rates contributes to their currency appreciation, and, in turn, a large outflow of capital from countries with a low-interest rate leads to a significant depreciation of their currency. However, in times of crisis and high uncertainty in the financial markets, investors massively withdraw from the carry trade. They sell financial assets purchased in a country with higher interest rates and then repay loans taken in a country with low-interest rates. A sudden increase in the supply of a country's currency with higher interest rates leads to its depreciation. On the other hand, the rise in demand for a country's currency with low-interest rates leads to its appreciation. The Japanese yen is one of the most popular funding currency in the carry trade and thus tends to appreciate during crisis periods. The paper aims to investigate the relationship between Japanese yen value and financial market uncertainty measured by the Volatility Index VIX and St. Louis FED Financial Stress Index. Based on the component generalized autoregressive conditional heteroscedasticity model CGARCH with asymmetric threshold term, it has been shown that the increase in financial markets uncertainty contributes to significant appreciation of the Japanese yen against the US dollar. It implies that the Japanese currency is an example of a safe-haven currency and can be applied to hedge financial stress for global equity investors.

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