scholarly journals Monetary Policy And Stock Returns: The Case Of Turkey

2011 ◽  
Vol 19 (4) ◽  
Author(s):  
Ramazan Sari ◽  
Farooq Malik
Keyword(s):  
Monetary Policy ◽  
Stock Market ◽  
Stock Returns ◽  
Forecast Error ◽  
Error Variance ◽  
Forecast Errors ◽  
Stock Market Volatility ◽  
Font Size ◽  
Significant Information ◽  
Forecast Error Variance

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-size: 11.0pt; mso-ansi-language: EN-US;"><span style="font-family: Times New Roman;">This paper <span style="color: black;">investigates how much of the variance in stock returns can be explained by monetary policy for the case of Turkey. </span>We extend the work of Ewing (2001a) for the case of Turkey by using the newly developed generalized forecast error variance decomposition technique [Koop et al. (1996), Pesaran and Shin (1998)]. Results suggest that the growth rate of money supply contain significant information <span style="color: black;">for predicting</span> variance of future forecast errors of stock returns. The results provide information which is important for building accurate asset pricing models, forecasting future stock market volatility and furthers our understanding of stock market behavior in Turkey.<span style="color: black;"></span></span></span></p>

scholarly journals Intraday Volatility Spillovers among European Financial Markets during COVID-19

2021 ◽  
Vol 9 (1) ◽  
pp. 5
Author(s):  
Faheem Aslam ◽  
Paulo Ferreira ◽  
Khurrum Shahzad Mughal ◽  
Beenish Bashir
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Forecast Error ◽  
Error Variance ◽  
Stock Market Volatility ◽  
Volatility Spillovers ◽  
Forecast Error Variance ◽  
Intraday Volatility ◽  
Market Interdependence ◽  
Rolling Windows

During crises, stock market volatility generally rises sharply, and as consequence, spillovers are identified across markets. This study estimates the volatility spillover among twelve European stock markets representing all four regions of Europe. The data consists of 10,990 intraday observations from 2 December 2019 to 29 May 2020. Using the methodology of Diebold and Yilmaz, we use static and rolling windows to characterize five-minute volatility spillovers. Our results show that 77.80% of intraday volatility forecast error variance in twelve European markets comes from spillovers. Furthermore, the highest gross directional volatility spillovers are found in Sweden and the Netherlands, while the minimum spillovers to other stock markets are observed in the stock markets of Poland and Ireland. However, German and Dutch markets transmit the highest net directional volatility spillovers. Splitting the whole sample in pre- and post-pandemic declaration (11 March 2020) we find more stable spillovers in the latter. The findings reveal important information about European stock market interdependence during COVID-19, which will be beneficial to both policy-makers and practitioners.

scholarly journals The communication effects on inflation forecast errors: Empirical evidence from Colombia

2020 ◽  
pp. 16-16
Author(s):  
Juan Zapata ◽  
Juan Ciro
Keyword(s):  
Central Bank ◽  
Empirical Evidence ◽  
Forecast Error ◽  
Decomposition Analysis ◽  
Error Variance ◽  
Forecast Errors ◽  
Central Bank Communication ◽  
Egarch Model ◽  
Forecast Error Variance ◽  
Variance Decomposition Analysis

The purpose of this article is to explore the central bank's ability to management inflation forecast errors in Colombia. We present empirical evidence based on the Colombian experience with data from the period of 2008 to 2020. The communication channel selected for analysis is the press releases. The empirical evidence is divided into three steps: (i) regression analysis using an EGARCH model, (ii) use of VAR models, and (iii) variance decomposition analysis. The communications effects are significant for several months and that close to half of the forecast error variance can be explained by innovations in central bank communication. The results obtained allow monetary policymakers to develop more efficient strategies for anchoring expectations and strengthening the central bank credibility.

scholarly journals Measuring monetary policy by money supply and interest rate: evidence from emerging economies

2021 ◽  
Vol 21 (3) ◽  
pp. 347-367
Author(s):  
Trung Thanh Bui ◽  
Kiss Dávid Gábor
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Money Supply ◽  
Emerging Economies ◽  
Forecast Error ◽  
Impulse Response Function ◽  
Error Variance ◽  
Limited Effect ◽  
Forecast Error Variance

Abstract Although measuring monetary policy is a contentious issue in the literature, much less evidence on this issue is available for emerging economies. This paper aims to investigate the role of interest rate and money supply in measuring monetary policy in twelve emerging economies that target inflation through the analysis of Granger causality, impulse response function, and forecast error variance decomposition. The empirical results show that both money supply and interest rate are useful predictors for changes in inflation. Moreover, both show a comparable power to explain the variation of inflation. However, a rise in interest rate increases rather than decreases inflation, whereas money supply has a positive and expected effect on inflation. These findings suggest that interest rate may not fully capture the overall stance of monetary policy or interest rate has a limited effect on inflation.

scholarly journals Bank Lending Channel in Transmission of Monetary Policy in Japan, 2000–2012: The Sign Restrictions VAR Approach

2017 ◽  
Vol 4 (2) ◽  
pp. 87
Author(s):  
Masao Kumamoto ◽  
Juanjuan Zhuo
Keyword(s):  
Monetary Policy ◽  
Forecast Error ◽  
Error Variance ◽  
Bank Lending ◽  
Quantitative Easing ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Forecast Error Variance ◽  
Monetary Policy Shock ◽  
Regional Banks

This paper investigates empirically whether the bank lending channel of monetary policy existed in Japan from 2000 to 2012. We employ the sign restrictions VAR approach to deal with the identification problem. In particular, we focus on the differential effects of a quantitative easing monetary policy regardless of bank (City banks vs. Regional banks) and firm (all enterprises vs. small and medium-sized enterprises－SMEs) size. Our impulse response function analyses show that following a quantitative easing monetary policy shock, the lending of Regional banks increases more than that of City banks, and the bank lending rate of Regional banks declines in a larger magnitude. Moreover, the responses of output to reserve supply are larger in Regional banks than that in City banks. Our variance decomposition analyses show that a larger proportion of the forecast error variance in the bank lending of Regional banks relative to City banks, and a larger proportion of the forecast error variance in the bank lending to SMEs relative to all firms can be explained by monetary policy shock. Similarly, the loans of Regional banks have a larger impact on output than the loans of City banks, and the loans to SMEs have a larger impact on output than the loans to all firms. Moreover, output is more affected by the reserve supply to Regional banks than to City banks. These results together indicate that a quantitative easing policy has a greater impact on the real economy through the lending of Regional banks.

scholarly journals Stock Returns, Inflation and the “Reverse Causality” Hypothesis

2015 ◽  
Vol 4 (1) ◽  
pp. 32-50
Author(s):  
Mercy Ada Anyiwe ◽  
Sunday Osahon Igbinedion
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Forecast Error ◽  
Error Variance ◽  
Impulse Response Functions ◽  
Reverse Causality ◽  
Vector Error Correction ◽  
Vector Error ◽  
Forecast Error Variance ◽  
Causality Hypothesis

This paper attempts to empirically examine the Reverse Causality hypothesis within the Nigerian context during the period 1980 – 2011. Employing Vector Error Correction Methodology (VECM), causality was found between inflation and government stocks, with causality running from government stocks to inflation, thus providing evidence in support of the reverse causality hypothesis. The results from the forecast error variance decomposition (FEVD) and impulse response functions tend to further lend credence to this finding. Accordingly, this study suggests, in part, the need for a tight monetary policy which would help to reduce inflation and stock prices, as such measures would leave the individuals with less money to buy stocks. Such efforts should be complemented by augmenting domestic production and encouraging investment through inexpensive bank finance. 

scholarly journals Exchange Rate Volatility and Monetary Policy Shocks

2022 ◽  
Author(s):  
Gbalam Peter Eze ◽  
Tonprebofa Waikumo Okotori
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Forecast Error ◽  
Exchange Rate Volatility ◽  
Error Variance ◽  
Variance Decomposition ◽  
Long Run ◽  
Forecast Error Variance ◽  
Short Run ◽  
The Exchange Rate

The study investigated the influence of innovations in monetary policy on the rate of exchange volatility in Nigeria. The research adopted vector error correction model as well as impulse response function and forecast error variance decomposition function in the estimation using two models derived in the study. Monthly data between the periods 2009 and 2019 were adopted for the research. Our findings show that in the long run; all the monetary policy variables have a significant long run correlation with volatility in the exchange rate; but that money supply and the rate of exchange seem to have significant short run impact on volatility in the exchange rate, the other variables such as liquidity ratio or monetary policy rate did not show a significant short run relationship with the volatility in the exchange rate. Further findings on the volatility impulse response and the forecast error variance decomposition suggest a significant link between volatility in the exchange rate and money supply though the link was much more pronounced. The use of monthly data shows that the managed exchange rate regime by the CBN seems to have the desired effect in exchange rate volatility and thus having a critical impact on inflationary spikes.

scholarly journals Impact of the COVID-19 outbreak on the US equity sectors: Evidence from quantile return spillovers

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Syed Jawad Hussain Shahzad ◽  
Elie Bouri ◽  
Ladislav Kristoufek ◽  
Tareq Saeed
Keyword(s):  
Stock Market ◽  
Network Structure ◽  
Forecast Error ◽  
Common Factor ◽  
Error Variance ◽  
Stock Market Index ◽  
Vector Autoregressive ◽  
The Us ◽  
Market State ◽  
Forecast Error Variance

AbstractThe aim of this study is to examine the extreme return spillovers among the US stock market sectors in the light of the COVID-19 outbreak. To this end, we extend the now-traditional Diebold-Yilmaz spillover index to the quantiles domain by building networks of generalized forecast error variance decomposition of a quantile vector autoregressive model specifically for extreme returns. Notably, we control for common movements by using the overall stock market index as a common factor for all sectors and uncover the effect of the COVID-19 outbreak on the dynamics of the network. The results show that the network structure and spillovers differ considerably with respect to the market state. During stable times, the network shows a nice sectoral clustering structure which, however, changes dramatically for both adverse and beneficial market conditions constituting a highly connected network structure. The pandemic period itself shows an interesting restructuring of the network as the dominant clusters become more tightly connected while the rest of the network remains well separated. The sectoral topology thus has not collapsed into a unified market during the pandemic.

scholarly journals Information-Theoretic Measures and Modeling Stock Market Volatility: A Comparative Approach

Risks ◽  
2021 ◽  
Vol 9 (5) ◽  
pp. 89
Author(s):  
Muhammad Sheraz ◽  
Imran Nasir
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Exchange ◽  
Approximate Entropy ◽  
Market Volatility ◽  
Comparative Approach ◽  
Stock Market Volatility ◽  
Information Theoretic ◽  
Information Theoretic Measures ◽  
Garch Modeling

The volatility analysis of stock returns data is paramount in financial studies. We investigate the dynamics of volatility and randomness of the Pakistan Stock Exchange (PSX-100) and obtain insights into the behavior of investors during and before the coronavirus disease (COVID-19 pandemic). The paper aims to present the volatility estimations and quantification of the randomness of PSX-100. The methodology includes two approaches: (i) the implementation of EGARCH, GJR-GARCH, and TGARCH models to estimate the volatilities; and (ii) analysis of randomness in volatilities series, return series, and PSX-100 closing prices for pre-pandemic and pandemic period by using Shannon’s, Tsallis, approximate and sample entropies. Volatility modeling suggests the existence of the leverage effect in both the underlying periods of study. The results obtained using GARCH modeling reveal that the stock market volatility has increased during the pandemic period. However, information-theoretic results based on Shannon and Tsallis entropies do not suggest notable variation in the estimated volatilities series and closing prices. We have examined regularity and randomness based on the approximate entropy and sample entropy. We have noticed both entropies are extremely sensitive to choices of the parameters.

The influence of economic policy uncertainty and geopolitical risk on US citizens overseas air passenger travel by regional destination

2020 ◽  
pp. 135481662098119
Author(s):  
James E Payne ◽  
Nicholas Apergis
Keyword(s):  
Economic Policy ◽  
Forecast Error ◽  
Error Variance ◽  
Variance Decomposition ◽  
Air Travel ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty ◽  
Passenger Travel ◽  
Forecast Error Variance

This research note extends the literature on the role of economic policy uncertainty and geopolitical risk on US citizens overseas air travel through the examination of the forecast error variance decomposition of total overseas air travel and by regional destination. Our empirical findings indicate that across regional destinations, US economic policy uncertainty explains more of the forecast error variance of US overseas air travel, followed by geopolitical risk with global economic policy uncertainty explaining a much smaller percentage of the forecast error variance.

scholarly journals Predicting Water Availability in Water Bodies under the Influence of Precipitation and Water Management Actions Using VAR/VECM/LSTM

Climate ◽  
2021 ◽  
Vol 9 (9) ◽  
pp. 144
Author(s):  
Harleen Kaur ◽  
Mohammad Afshar Alam ◽  
Saleha Mariyam ◽  
Bhavya Alankar ◽  
Ritu Chauhan ◽  
...  
Keyword(s):  
Water Management ◽  
Short Term Memory ◽  
Forecast Error ◽  
Error Variance ◽  
Water Levels ◽  
Water Bodies ◽  
Economic Activities ◽  
Management Actions ◽  
Forecast Error Variance ◽  
Water Treatments

Recently, awareness about the significance of water management has risen as population growth and global warming increase, and economic activities and land use continue to stress our water resources. In addition, global water sustenance efforts are crippled by capital-intensive water treatments and water reclamation projects. In this paper, a study of water bodies to predict the amount of water in each water body using identifiable unique features and to assess the behavior of these features on others in the event of shock was undertaken. A comparative study, using a parametric model, was conducted among Vector Autoregression (VAR), the Vector Error Correction Model (VECM), and the Long Short-Term Memory (LSTM) model for determining the change in water level and water flow of water bodies. Besides, orthogonalized impulse responses (OIR) and forecast error variance decompositions (FEVD) explaining the evolution of water levels and flow rates, the study shows the significance of VAR/VECM models over LSTM. It was found that on some water bodies, the VAR model gave reliable results. In contrast, water bodies such as water springs gave mixed results of VAR/VECM.

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