Abstract
Using monthly data from January 1997 to July 2020, this study examines the impact of Global Economic Policy Uncertainty (GEPU), Geopolitical Risk (GPR), and oil price (WTI) on ASEAN stock exchanges such as the Jakarta Stock Exchange (JSE), Kuala Lumpur Composite Index (KLCI), Philippine Stock Exchange (PSI), Stock Exchange of Thailand (SET), and Vietnam Stock Index (VNI). We use a two-stage Markov switching model to model market returns as a time-varying transition probability Markovian process. The findings reveal some fascinating new information, such as the fact that global policy uncertainty has a strong negative impact on the bulk of ASEAN stock returns during periods of high volatility. Another finding shows that, contrary to assumptions, geopolitical concerns had no effect across all samples. We also discovered that, in both the low and high volatility regimes, oil price changes have a considerable impact on all ASEAN stock markets.
Highlights
Most Southeast Asian stock markets recovered back some ground lost in previous trends in May 2020, as certain governments and U.S states eased coronavirus restrictions in stages, bolstering optimism of an economic revival
Using monthly data from January 1997 to July 2020, this study examines the impact of Global Economic Policy Uncertainty (GEPU), Geopolitical Risk (GPR), and oil price (WTI) on ASEAN stock exchanges such as the Jakarta Stock Exchange (JSE), Kuala Lumpur Composite Index (KLCI), Philippine Stock Exchange (PSI), Stock Exchange of Thailand (SET), and Vietnam Stock Index (VNI)
Contrary to assumptions, geopolitical concerns had no effect across all samples. In both the low and high volatility regimes, oil price changes have a considerable impact on all ASEAN stock markets
Summary
Most Southeast Asian stock markets recovered back some ground lost in previous trends in May 2020, as certain governments and U.S states eased coronavirus restrictions in stages, bolstering optimism of an economic revival. In the case of ASEAN countries, global economic uncertainty (GEPU), geopolitical risk (GPR), and the impact of oil prices on stock returns receive little attention. According to Sharif et al (2020), they found that COVID-19 outbreak has a greater effect on the U.S geopolitical risk and on the U.S economic uncertainty, the oil slump had the strongest impact on the U.S stock markets in comparison to both COVID-19, EPU and GPR and the COVID-19 pandemic affect the oil prices, which can be explained by imposed travel restrictions. Grounded on the motivating facts, the stock market behaviors and the knowledge gaps, this study investigates the impacts of GEPU, GPR and oil price on ASEAN country's stock returns in regime shifts/environments using Markov Switching model regression
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: International Journal of Academic Research in Accounting, Finance and Management Sciences
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
