scholarly journals Volatility Spillovers between Interest Rates and Equity Markets of Developed Economies

2019 ◽  
Vol 8 (3) ◽  
pp. 39-50
Author(s):  
Wilson Donzwa ◽  
Rangan Gupta ◽  
Mark E. Wohar
Keyword(s):  
Interest Rates ◽  
Stock Returns ◽  
Variance Test ◽  
Full Sample ◽  
Developed Economies ◽  
Volatility Spillovers ◽  
Daily Data ◽  
The Us ◽  
Before And After ◽  
The Uk

Abstract This study employs the recently developed Lagrange multiplier-based causality-in-variance test by Hafner and Herwartz (2006), to determine the volatility spillovers between interest rates and stock returns for the US, the euro area, the UK, and Japan. The investigation pays careful attention to volatility transmissions between stock returns and interest rates before and after these economies reached the Zero Lower Bound (ZLB), which is permitted via the use of Shadow Short Rates (SSR), used as a proxy for monetary policy decisions. The results based on daily data imply that while bidirectional causality is observed, the volatility spillover from interest rates to stock markets are more prominent for the full-sample, as well as the sub-samples covering the pre- and during-ZLB periods.

The Liberalizers: Justifying Free-Market Finance

2018 ◽  
Author(s):  
Louçã Francisco ◽  
Ash Michael
Keyword(s):  
Public Discourse ◽  
Free Market ◽  
Second World War ◽  
Economic Regulation ◽  
Developed Economies ◽  
The Us ◽  
The 1960S ◽  
The Uk ◽  
Second World ◽  
The New Deal

Chapter 5 traces how free market ideology displaced the apparent consensus on economic regulation that emerged from the Depression, the New Deal, and the Second World War. Viewed as cranks within economics through the 1960s, Milton Friedman and his supporters built an apparatus of ideas, publications, students, think tanks, and rich supporters, establishing outposts in Latin America and the UK. When developed economies faltered in the 1970s, Friedman’s neoliberal doctrine was ready. With citizens, consumers, and workers feeling worked over by monopolies, inflation, unemployment, and taxes, these strange bedfellows elected Reagan in the US and Thatcher in the UK and rolled to power in academia and in public discourse with a doctrine of privatization, liberalization, and deregulation. Friedman, Eugene Fama, and James Buchanan whose radical free market views triumphed at the end of the 1970s are profiled. A technical appendix, “Skeptics and Critics vs. True Believers” explores the economic debates.

scholarly journals Are stock returns an inflation hedge for the UK? Evidence from a wavelet analysis using over three centuries of data

2018 ◽  
Vol 23 (3) ◽  
Author(s):  
Aviral Kumar Tiwari ◽  
Juncal Cunado ◽  
Rangan Gupta ◽  
Mark E. Wohar
Keyword(s):  
South Africa ◽  
Wavelet Analysis ◽  
Stock Returns ◽  
Time Period ◽  
Inflation Rates ◽  
The Us ◽  
Long Time ◽  
Time Periods ◽  
The Uk ◽  
The Relationship

Abstract This paper analyzes the relationship between stock returns and the inflation rates for the UK over a long time period (February 1790–February 2017) and at different frequencies, by employing a wavelet analysis. We also compare the results for the UK economy with those for the US and two developing countries (India and South Africa). Overall, our results tend to suggest that, while the relationship between stock returns and inflation rates varies across frequencies and time periods, there is no evidence of stock returns acting as an inflation hedge, irrespective of whether we look at the two developed or the two developing markets in our sample.

Growth and returns across countries

2021 ◽  
pp. 78-87
Author(s):  
Jesper Rangvid
Keyword(s):  
Economic Growth ◽  
Interest Rates ◽  
Stock Returns ◽  
Stock Prices ◽  
Economic Activity ◽  
Wide Margin ◽  
The Past ◽  
Long Run ◽  
The Us ◽  
Long Run Risk

This chapter examines the relation between long-run economic growth and returns across countries. Have countries that have experienced high GDP growth historically also experienced high stock returns? The chapter contains three main messages. First, there is no clear tendency that countries that have grown fast in the past are also countries that have delivered high stock returns in the past. Second, as in the US, stock prices have in many countries followed economic activity in the long run. Third, real interest rates relate to economic growth across countries in the long run.Another conclusion emerging from this chapter is that long-run stock returns exceed long-run rates of economic growth and long-run risk-free rates by a wide margin.

scholarly journals The Determinants of CDS Spreads in Multiple Industry Sectors: A Comparison between the US and Europe

Risks ◽  
2018 ◽  
Vol 6 (3) ◽  
pp. 89 ◽  
Author(s):  
Jatin Malhotra ◽  
Angelo Corelli
Keyword(s):  
Interest Rates ◽  
Global Financial Crisis ◽  
Causality Test ◽  
Macroeconomic Variables ◽  
Credit Default ◽  
The Us ◽  
Before And After ◽  
The Global Financial Crisis ◽  
Industry Sectors ◽  
The Relationship

The paper analyzes the relationship between the credit default swaps (CDS) spreads for 5-year CDS in Europe and US, and fundamental macroeconomic variables such as regional stock indices, oil prices, gold prices, and interest rates. The dataset includes consideration of multiple industry sectors in both economies, and it is split in two sections, before and after the global financial crisis. The analysis is carried out using multivariate regression of each index vs. the macroeconomic variables, and a Granger causality test. Both approaches are performed on the change of value of the variables involved. Results show that equity markets lead in price discovery, bidirectional causality between interest rate, and CDS spreads for most sectors involved. There is also bidirectional causality between stock and oil returns to CDS spreads.

Strategies for Business Firms in Declining Markets

2009 ◽  
Vol 5 (2) ◽  
pp. 173-181
Author(s):  
Sarira Aurangabadkar
Keyword(s):  
Interest Rates ◽  
Developed Countries ◽  
Fiscal Year ◽  
Government Growth ◽  
Global Recession ◽  
Reserve Bank ◽  
The Us ◽  
Manufacturing Activity ◽  
The Government ◽  
The Uk

The economic crisis that has engulfed the world since 2007 has become serious by the first quarter of 2009.Many developed countries too are affected severely, namely the US, Germany, the UK and others. Fortunately, India as of now seems to be less affected, yet the winds of global recession are now felt. The Indian economy grew at an annual rate of 7.6% in the quarter ending in September, 2008. As per the projections of the government growth in the fiscal year, 2008-09 could be in the range of 7 to 8 %, which is, lower than 9% in the last year. The government has unveiled a multibillion dollar stimulus on 7th December, 2008 and 2nd January, 2009 respectively. The Reserve Bank of India has cut interest rates aggressively. India Inc has felt the heat of the global meltdown in the third quarter ending in December, 2008 where the income has dropped by a massive 23% points compared to the previous year. Indian manufacturing activity has contracted for the second consecutive month in December, 2008 to its lowest in more than three and half years. India’s exports too have declined by 12.1 % in October, 2008 showing a negative trend for the first time in the last five years.

Market volatility endangers moves to replace LIBOR

2020 ◽  
Keyword(s):  
United States ◽  
Interest Rates ◽  
Banking Sector ◽  
Market Volatility ◽  
Content Type ◽  
Consumer Loans ◽  
The United Kingdom ◽  
Interest Rate Swaps ◽  
The Us ◽  
The Uk

Subject The transition away from LIBOR. Significance The London Interbank Offered Rate (LIBOR) has been relied upon worldwide since 1970 for setting interest rates on syndicated loans, corporate debt, consumer loans, interest rate swaps and other derivatives. Following the 'LIBOR scandal' of 2008, the UK Financial Conduct Authority took over the regulation and administration of the rate, and no manipulation has emerged since 2013. Nevertheless, the United Kingdom and United States are determined to replace LIBOR. Impacts COVID-19 could prompt the US Fed to increase its support to the repo market, exacerbating fears that SOFR is not market determined. The scale and duration of COVID-19-related economic disruptions loom over banking sector profitability. Banks will struggle to balance immediate priorities triggered by COVID-19, and the need to devote staff and funds to the LIBOR transition.

scholarly journals The Influence of Exchange Rate, World Oil Price, and BI Rate on Airline Companie’s Return in Indonesian Stock Market

2019 ◽  
Vol 3 (3) ◽  
pp. 321
Author(s):  
Yonatan Alvin Stefan ◽  
Robiyanto Robiyanto
Keyword(s):  
Exchange Rate ◽  
Stock Returns ◽  
Stock Return ◽  
Stock Exchange ◽  
National Development ◽  
Oil Price ◽  
Infrastructure Development ◽  
Daily Data ◽  
Analysis Technique ◽  
The Us

In an effort to support the economic growth of Indonesia, an infrastructure development is carried out to achieve the national development. It brings positive influences on transportation companies in Indonesia. Many companies list their shares to Indonesia Stock Exchange, including PT. Garuda Indonesia (Persero) Tbk (IDX code: GIAA) and PT. AirAsia Indonesia Tbk (IDX code: CMPP), aiming to have additional capital sources. The two companies can be such a reference for investors to make investments, but they still need to consider the macro factors attached. This study examines the influende of exchange rate, world oil price, and Bank Indonesia (BI) rates on the GIAA and CMPP stock returns. The analysis technique used was Generalize Autoregressive Conditional Heteroscedasticity (GARCH) and daily data starting from their IPO to February 28th, 2019. The results showed that the exchange rate negatively affected the GIAA and CMPP stock returns, while the world oil prices only negatively affected the CMPP stock return, and the BI rates only negatively affected the GIAA stock return. In general, the investors are suggested not to buy the GIAA and CMPP shares when the IDR exchange rate weakens against the US dollar exchange rate.

The Effect of Quantitative Easing on Investment in the US and UK: An SVAR Approach

2018 ◽  
Author(s):  
Thomas Russell
Keyword(s):  
Interest Rates ◽  
Quantitative Easing ◽  
Structural Vector Autoregression ◽  
Bond Yields ◽  
Bond Yield ◽  
Downward Pressure ◽  
The Us ◽  
Historical Relationship ◽  
The Uk ◽  
The Impact

Following the collapse of Lehman Brothers in 2008, the Federal Reserve and the Bank of England implemented asset purchase programs to provide further liquidity to faltering markets, and to continue to place downward pressure on market interest rates. Later called Quantitative Easing, the higher asset prices and lower market yields induced by the purchases were expected to translate into lower market borrowing costs and increased investment. This project focused on estimating the effect of Quantitative Easing on real investment in the US and UK up to 2010. First, the historical relationship between bond yields and investment was estimated using a time series econometric model called a structural vector autoregression. Next, using the historical relationship between bond yields and investment, the impact of the asset purchases on investment was calculated using the bond yield changes induced by  Quantitative Easing announcements. Deviations in bond yields on Quantitative Easing announcement dates suggested an impact on investment of 5.93% in the US, and an impact of 3.37% in the UK. Moreover, both the US and UK econometric results are statistically significant. Taking into account the econometric assumptions required to estimate the impact of Quantitative Easing on investment, the results in this project should be viewed with caution. However, the results will be useful in framing future thought on Quantitative Easing as a tool to provide macroeconomic stability 

scholarly journals Interrelation and spillover effects between stocks and bonds: cross-market and cross-asset evidence

2020 ◽  
Vol 37 (3) ◽  
pp. 561-582
Author(s):  
David G. McMillan
Keyword(s):  
Stock Returns ◽  
Spillover Effects ◽  
Content Type ◽  
Volatility Spillovers ◽  
Bond Returns ◽  
Portfolio Managers ◽  
Bond Return ◽  
Realised Volatility ◽  
Cross Country ◽  
The Uk

Purpose This paper aims to examine the behaviour, both contemporaneous and causal, of stock and bond markets across four major international countries. Design/methodology/approach The authors generate volatility and correlations using the realised volatility approach and implement a general vector autoregression approach to examine causality and spillovers. Findings While results confirm that same asset-cross country return correlations and spillovers increase over time, the same in not true with variance and covariance behaviour. Volatility spillovers across countries exhibit a substantial amount of time variation; however, there is no evidence of trending in any direction. Equally, cross asset – same country correlations exhibit both negative and positive values. Further, the authors report an inverse relation between same asset – cross country return correlations and cross asset – same country return correlations, i.e. the stock return correlation across countries increases at the same time the stock and bond return correlation within each country declines. Moreover, the results show that the stock and bond return correlations exhibit commonality across countries. The results also demonstrate that stock returns lead movement in bond returns, while US stock and bond returns have predictive power other country stock and bond returns. In terms of the markets analysed, Japan exhibits a distinct nature compared with those of Germany, the UK and USA. Originality/value The results presented here provide a detailed characterisation of how assets interact both with each other and cross-countries and should be of interest to portfolio managers, policy-makers and those interested in modelling cross-market behaviour. Notably, the authors reveal key differences between the behaviour of stocks and bonds and across different countries.

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