scholarly journals Expectations Concordance and Stock Market Volatility: Knightian Uncertainty in the Year of the Pandemic

2021 ◽  
Author(s):  
Roman Frydman ◽  
◽  
Nicholas Mangee ◽  
Keyword(s):  
Stock Market ◽  
Stock Price ◽  
Price Volatility ◽  
Market Volatility ◽  
Knightian Uncertainty ◽  
Stock Market Volatility ◽  
Daily News ◽  
News Reports ◽  
Ex Post ◽  
Concordance Measures

This study introduces a novel index based on expectations concordance for explaining stock-price volatility when historically unique events cause unforeseeable change and Knightian uncertainty in the process driving outcomes. Expectations concordance measures the degree to which nonrepetitive events are associated with directionally similar expectations of future returns. Narrative analytics of daily news reports allow for assessment of bullish versus bearish views in the stock market. Increases in expectations concordance across all KU events leads to reinforcing effects and an increase in stock market volatility. Lower expectations concordance produces a stabilizing effect wherein the offsetting views reduce market volatility. The empirical findings hold for ex post and ex ante measures of volatility and for OLS and GARCH estimates.

scholarly journals Expectations Concordance and Stock Market Volatility: Knightian Uncertainty in the Year of the Pandemic

2021 ◽  
Vol 14 (11) ◽  
pp. 521
Author(s):  
Roman Frydman ◽  
Nicholas Mangee
Keyword(s):  
Stock Market ◽  
Stock Price ◽  
Price Volatility ◽  
Market Volatility ◽  
Knightian Uncertainty ◽  
Stock Market Volatility ◽  
Daily News ◽  
News Reports ◽  
Ex Post ◽  
Concordance Measures

This study introduces a novel index based on expectations concordance for explaining stock-price volatility when novel events that are each somewhat unique cause unforeseeable change and Knightian uncertainty in the process driving outcomes. Expectations concordance measures the degree to which KU events are associated with directionally similar expectations of future returns. Narrative analytics of daily news reports allow for the assessment of bullish versus bearish views in the stock market. Increases in expectations concordance across all KU events results in reinforcing effects and an increase in stock market volatility. Lower expectations concordance produces a stabilizing effect wherein the offsetting views reduce market volatility. The empirical findings hold for ex post and ex ante measures of volatility and for OLS and GARCH estimates.

scholarly journals Stock market volatility and it's determinants in Pakistan stock market.

2021 ◽  
Vol 17 (1) ◽  
Author(s):  
Sumaira Tufail ◽  
Keyword(s):  
Foreign Direct Investment ◽  
Stock Market ◽  
Foreign Exchange ◽  
Stock Price ◽  
Direct Investment ◽  
Dividend Policy ◽  
Price Volatility ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Stock Price Volatility

Stock price volatility is considered as one of the most important areas of concern for the capital markets regulators, investors and academicians in recent years. Corporate dividend policy as a determinant of stock market volatility is a significant area of concern for the investors as well as the managers of the company due to political instability and the current economic crisis in Pakistan. This study aims at determining the effect of significant factors such as dividend yield, dividend payout ratio, foreign exchange rate and foreign direct investment on stock price fluctuation in Pakistan, which contributes to overall variation in stock price volatility. The study used a sample of 200 Pakistani listed companies by employing the regression analysis. The endogeneity issues were addressed through the generalized method of moments (GMM) estimation. The study concludes that stock price volatility has a negative association with dividend policy. The study also suggests that foreign direct investment and foreign exchange rates both negatively influence the stock price fluctuations in emerging markets. The findings of this study provide practical implications for the investors, policymakers and firm managers.

Presidential Elections and the Stock Market: Comparing Markov-Switching and Fractionally Integrated GARCH Models of Volatility

2004 ◽  
Vol 12 (3) ◽  
pp. 296-322 ◽  
Author(s):  
David Leblang ◽  
Bumba Mukherjee
Keyword(s):  
Stock Market ◽  
Presidential Election ◽  
Statistical Models ◽  
Stock Price ◽  
Markov Switching ◽  
Price Volatility ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Markov Switching Models ◽  
Switching Models

Existing research on electoral politics and financial markets predicts that when investors expect left parties—Democrats (US), Labor (UK)—to win elections, market volatility increases. In addition, current econometric research on stock market volatility suggests that Markov-switching models provide more accurate volatility forecasts and fit stock price volatility data better than linear or nonlinear GARCH (generalized autoregressive conditional heteroskedasticity) models. Contrary to the existing literature, we argue here that when traders anticipate that the Democratic candidate will win the presidential election, stock market volatility decreases. Using two data sets from the 2000 U.S. presidential election, we test our claim by estimating several GARCH, exponential GARCH (EGARCH), fractionally integrated exponential GARCH (FIEGARCH), and Markov-switching models. We also conduct extensive forecasting tests—including RMSE and MAE statistics as well as realized volatility regressions—to evaluate these competing statistical models. Results from forecasting tests show, in contrast to prevailing claims, that GARCH and EGARCH models provide substantially more accurate forecasts than the Markov-switching models. Estimates from all the statistical models support our key prediction that stock market volatility decreases when traders anticipate a Democratic victory.

scholarly journals Margin requirements and Stock Market Volatility in Bangladesh

2012 ◽  
Vol 3 (2) ◽  
pp. 29
Author(s):  
A. F. M. Mainul Ahsan ◽  
Mohammad Osman Gani ◽  
Md. Bokhtiar Hasan
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Stock Exchange ◽  
Price Volatility ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Margin Requirements ◽  
Margin Requirement ◽  
Daily Stock Returns ◽  
The Impact

Officially margin requirements in bourses in Bangladesh were initiated on April 28, 1999, to limit the amount of credit available for the purpose of buying stocks. The goal of this paper is to measure the impact of changing margin requirement on stock returns' volatility in Dhaka Stock Exchange (DSE). The impact of margin requirement on stock price volatility has been extensively studied with mixed and ambiguous results. Using daily stock returns, we found mixed evidence that SEC's margin requirements have significant impact on market volatility in DSE.

Forecasting Stock Market Volatility: Evidence from Six Emerging Markets

2013 ◽  
Vol 14 (2) ◽  
pp. 68-93
Author(s):  
Naliniprava Tripathy ◽  
Ashish Garg
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Markets ◽  
Stock Price ◽  
Market Volatility ◽  
Future Market ◽  
Investment Strategies ◽  
Stock Market Volatility ◽  
Efficient Management ◽  
Asymmetric Garch

This paper forecasts the stock market volatility of six emerging countries by using daily observations of indices over the period of January 1999 to May 2010 by using ARCH, GARCH, GARCH-M, EGARCH and TGARCH models. The study reveals the positive relationship between stock return and risk only in Brazilian stock market. The analysis exhibits that the volatility shocks are quite persistent in all country’s stock market. Further the asymmetric GARCH models find a significant evidence of asymmetry in stock returns in all six country’s stock markets. This study confirms the presence of leverage effect in the returns series and indicates that bad news generate more impact on the volatility of the stock price in the market. The study concludes that volatility increases disproportionately with negative shocks in stock returns. Hence investors are advised to use investment strategies by analyzing recent and historical news and forecast the future market movement while selecting portfolio for efficient management of financial risks to reap benefits in the stock markets.

Exploring the Relationships among Interest Rate, Exchange Rate, and Stock Market in Indonesia

2016 ◽  
Vol 4 (3) ◽  
pp. 37-43
Author(s):  
Sherlinda Octa Yuniarsa ◽  
Jui-Chuan Della Chang
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Stock Market ◽  
Stock Price ◽  
Structural Breaks ◽  
Emerging Market ◽  
Exchange Rate Volatility ◽  
Market Volatility ◽  
Empirical Literature ◽  
Stock Market Volatility

Objective - The purpose of this research is to explore the relationships among interest rate, exchange rate, and stock price in Indonesia. Methodology/Technique - This study used data from the Central Bank of Indonesia to empirically test a proposed model of interest rate, exchange rate, and stock price. Findings - The findings confirmed that there are positive volatilities from exchange rate and negative volatility from interest rate. The relationships among interest rate, exchange rate, and stock market excessive volatility a little bit strengthen during economic crises, a study that allows for structural breaks, to account for the effects of sudden macroeconomic shocks, recessions, and financial crises, would be important to empirical literature on Indonesia. Novelty - This study proved that it is important to point out the variance decomposition results also showed that except for volatility in the exchange rate, interest rate, and stock market volatility also seems to explain quite a high proportion of the some variations of the macroeconomic excessive volatility. Type of Paper - Conceptual Keywords: interest rate volatility, exchange rate volatility, stock market volatility, emerging market, Asymmetric ARCH models

scholarly journals DYNAMICS OF CONSUMER EXPENDITURE AND STOCK MARKET PRICES AND UNCERTAINTY: MALAYSIAN EVIDENCE

2013 ◽  
Vol 58 (04) ◽  
pp. 1350025
Author(s):  
MANSOR H. IBRAHIM ◽  
SIONG HOOK LAW
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Stock Price ◽  
Private Consumption ◽  
Emerging Market ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Consumer Expenditure ◽  
Market Uncertainty ◽  
Long Run

The present paper analyzes the role of stock market, more specifically real stock prices and stock market uncertainty/volatility, on private consumption behavior for an emerging market, Malaysia, using quarterly data from 1991 to 2009. Employing the autoregressive distributed lag approach to cointegration test, the paper establishes a long-run equilibrium that ties private consumption to its determinants — real income, real stock prices, real lending rate, and stock market volatility. In the long run, the presence of the stock market wealth effect is documented. At the same time, the stock market volatility is also noted to depress private consumption particularly when the volatility is at the degree as observed during the Asian crisis. The authors further note the short-run influences of real stock price changes on consumption growth and the adjustment of private consumption to the long-run level when it is modeled in an error-correction setting. Our simple simulation indicates that the drop in the private consumption due to the decline in stock market wealth post-crisis is substantial, amounting to 2.7% of average post-crisis gross domestic product.

The association between stock price volatility and financial news – a sentiment analysis approach

Kybernetes ◽  
2017 ◽  
Vol 46 (8) ◽  
pp. 1341-1365 ◽  
Author(s):  
Jia-Lang Seng ◽  
Hsiao-Fang Yang
Keyword(s):  
Stock Market ◽  
Sentiment Analysis ◽  
Stock Returns ◽  
Price Volatility ◽  
Model Verification ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Content Type ◽  
Financial News ◽  
Depth Analysis

Purpose The purpose of this study is to develop the dictionary with grammar and multiword structure has to be used in conjunction with sentiment analysis to investigate the relationship between financial news and stock market volatility. Design/methodology/approach An algorithm has been developed for calculating the sentiment orientation and score of data with added information, and the results of calculation have been integrated to construct an empirical model for calculating stock market volatility. Findings The experimental results reveal a statistically significant relationship between financial news and stock market volatility. Moreover, positive (negative) news is found to be positively (negatively) correlated with positive stock returns, and the score of added information of the news is positively correlated with stock returns. Model verification and stock market volatility predictions are verified over four time periods (monthly, quarterly, semiannually and annually). The results show that the prediction accuracy of the models approaches 66% and stock market volatility with a particular trend-predicting effect in specific periods by using moving window evaluation. Research limitations/implications Only one news source is used and the research period is only two years; thus, future studies should incorporate several data sources and use a longer period to conduct a more in-depth analysis. Practical implications Understanding trends in stock market volatility can decrease risk and increase profit from investment. Therefore, individuals or businesses can feasibly engage in investment activities for profit by understanding volatility trends in capital markets. Originality/value The ability to exploit textual information could potentially increase the quality of the data. Few scholars have applied sentiment analysis in investigating interdisciplinary topics that cover information management technology, accounting and finance. Furthermore, few studies have provided support for structured and unstructured data. In this paper, the efficiency of providing the algorithm, the model and the trend in stock market volatility has been demonstrated.

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