Effect Of Volatility Research Articles

EXCHANGE RATE VOLATILITY AND MANUFACTURING OUTPUT IN ECOWAS ECONOMIES

This study examined the impact of exchange rate volatility on manufacturing output in the ECOWAS, using time series data spanning from 1970 to 2019. The study employed panel data analysis to examine the relationship between exchange rate volatility and manufacturing output among all the ECOWAS countries. GARCH was used to establish the existence of volatility; Dumitrescu & Hurlin Granger non-causality test for causality direction between manufacturing and exchange rate, while Panel fixed, and random effect model was used to assess the magnitude of the effects of exchange rate volatility on manufacturing output in ECOWAS. The result of the volatility test from GARCH confirmed the presence of volatility in Exchange rates across all the countries in ECOWAS. Furthermore, the random effect model results showed that exchange rate volatility has a positive and significant impact on manufacturing output in ECOWAS. Based on the findings of this study, it is therefore recommended that exchange rate policies such as floating exchange rates and exchange rate sterilized intervention that will pave the way for competitiveness should be formulated by monetary authorities in ECOWAS.

PORTFOLIO VOLATILITY SPILLOVER

In this paper, the authors estimate portfolio volatilities and use variance−decomposition techniques and Cholesky factorization to construct a portfolio volatility spillover index. Furthermore, the authors show that spillover risks are persistent and much more common than well-known indicators like the turbulence index and the CBOE VIX index might suggest. Moreover, portfolio volatilities show contributions to and from other portfolio volatilities, which indicate elevated financial market interconnectedness and heightened risk. Foreign exchange contributes strong volatility shocks to other portfolios. More importantly, its contribution has a different magnitude and direction after the Global Financial Crisis (GFC) than before depending on the base currency. To show the causality effects of portfolio volatility spillover the authors apply both econometric models and graph theory, demonstrating that the importance is time varying. This requires monitoring and analysis in decision making regarding portfolio management, portfolio construction, and risk management.

Exchange rate volatility and export in Turkey: Does the nexus vary across the type of commodity?

Turkey has experienced a rapid increase in exports during the last two decades. In addition, there has been a significant increase in the exchange rate and its volatility in recent years. Hence, the empirical examination of the volatility-export nexus in a comprehensive framework seems to be important to provide insights for policymakers. In this study, we investigate how the exchange rate volatility affects Turkey's exports to its major partners namely, Belgium, France, Germany, Italy, Netherlands, Russia, Spain, the UK, and the USA for the period of 2002:01–2019:12. Considering the existence of an asymmetric effect of volatility on trade, we separate positive changes of volatility from negative changes via the partial sum concept and introduce nonlinearity into the estimation and testing procedure. Our results indicate that (i) exchange rate volatility plays quite important role for Turkey's export, (ii) asymmetry matters for better understanding the volatility-export nexus, (iii) the impact of volatility is country and commodity-specific, (iv) exchange rate volatility shows higher impacts on capital and consumption goods export. Lastly, exchange rate volatility affects exports in opposite directions in the short and long-run. Both low and high volatility generally increase (decrease) Turkey's exports in the short-run (long-run). These results provide important implications for policymakers.

Infectious disease equity market volatility, geopolitical risk, speculation, and commodity returns: Comparative analysis of five epidemic outbreaks

This paper uses a time-varying Granger causality test and time-varying parameter vector autoregression with stochastic volatility model to analyze the effects of infectious disease equity market volatility (ID-EMV), geopolitical risk (GPR), and speculation on commodity returns. The time-varying effects of ID-EMV, GPR, and speculation on commodity returns are investigated and compared in five epidemics during 1998–2021: Bird Flu in 1998, SARS in 2003, Swine Flu in 2009, MERS and Ebola in 2014, and COVID-19 in 2019. A further analysis is performed for five commodity subcategories of textiles, industry, metals, livestock, and food. Results show that time-varying effects are significant, and most responses to ID-EMV are positive, to GPR are changing from negative to positive, and to speculation are negative. Notably, ID-EMV in the ongoing COVID-19 pandemic is the worst hit to commodity returns in more than two decades.

Exchange rate changes on export volumes in South Africa under the inflation targeting period.

This paper examines the long run effects of the exchange rate changes on export volumes in South Africa under the inflation targeting period using the Johansen cointegration and the Engle–Granger approaches. This paper further examines whether the 2007 global financial crisis, rising government debt, and cost of credit post 2008Q4 impacted the magnitudes of determinants of export volumes. Both tests confirm a long run relationship amongst export volumes, exchange rate, and foreign income. The long run exchange rate impacts are bigger than the short run effects. Foreign income demand has bigger impact on export volumes than the exchange rate. Evidence shows that 2007 global financial crisis reduced the impact of the exchange rate depreciation on export volumes but increased the impact of the foreign income demand. This suggests relying on the exchange rate as a policy tool alone to achieve the external adjustment may not raise export volumes. The global financial crisis exacerbated the adverse effects of the exchange rate volatility on the export volumes, indicating that policymakers should implement policies that limit the exchange rate volatility. The adverse effects of the global financial crisis on export volumes were transmitted more via the consumer prices rather than the exchange rate, suggesting that South Africa lost its price competitiveness during the crisis period. Rising government debt and the cost of credit post 2008Q4 are transmitted more via the exchange rate than relative price ratios to reduce export volumes. The exchange rate volatility channel does not transmit the rising government debt shocks to export volumes.Supplementary InformationThe online version contains supplementary material available at 10.1007/s43546-022-00217-2.

Sovereign Wealth Funds in Theory and Practice

Are natural resources a curse or a blessing? The answer may depend on how natural wealth is managed. By transforming a temporary windfall into a permanent stock in the form of a sovereign wealth fund, resource-rich economies can avoid volatility and Dutch disease effects, save for future generations, and invest locally. We review the theory behind these resource funds and explore the empirical evidence for their success. Our review is complemented by case studies that highlight some of the more nuanced features, behavior, and effects of resource funds. While the theoretical research highlights the situational success of funds, empirical examinations are minimal. We discuss possible reasons for this gap in the literature and, in doing so, highlight some of the challenges associated with empirical research in this area and discuss possible paths forward.

Return and Volatility Spillovers among Sector Indexes in Shanghai-Shenzhen-Hong Kong Stock Markets: Evidence from the Time and Frequency Domains

ABSTRACT The opening of Shanghai-Hong Kong Stock Connect (SH-HK) Program and Shenzhen-Hong Kong Stock Connect (SZ-HK) Program has changed the relationship between stock markets, and caused more challenges to the risk management and asset portfolio. Therefore, this paper applies the DY and BK methods to analyze the static and dynamic spillovers of Shanghai, Shenzhen and Hong Kong stock markets from the time and frequency perspectives. Based on 29 sector indexes from three markets ranging from June 15, 2011 to December 31, 2020, three conclusions are obtained. The implementation of the SH-HK Program and the SZ-HK Program has enhanced the spillover effects of return and volatility among Chinese Mainland stock markets and Hong Kong stock market. The Shanghai Energy, the Shanghai Material and the Shanghai Industrial are always obvious net senders of spillover, while the Hang Seng telecommunications, the Hang Seng real estate construction industry and the Hang Seng public utilities are always net receivers. The spillover mainly occurs in the short term. These results would be beneficial to risk supervision and portfolio optimization.

On the Economic Significance of Stock Return Predictability

AbstractWe study the effects of time-varying volatility and investment horizon on the economic significance of stock market return predictability from the perspective of Bayesian investors. Using a vector autoregression framework with stochastic volatility (SV) in market returns and predictor variables, we assess a broad set of twenty-six predictors with both in-sample and out-of-sample designs. Volatility and horizon are critically important for assessing return predictors, as these factors affect how an investor learns about predictability and how she chooses to invest based on return forecasts. We find that statistically strong predictors can be economically unimportant if they tend to take extreme values in high volatility periods, have low persistence, or follow distributions with fat tails. Several popular predictors exhibit these properties such that their impressive statistical results do not translate into large economic gains. We also demonstrate that incorporating SV leads to substantial utility gains in real-time forecasting.

Dynamic spillover effects and connectedness among climate change, technological innovation, and uncertainty: Evidence from a quantile VAR network and wavelet coherence

This study investigated time-frequency transmission and connectedness among green indexes dealing with clean energy, environmental preservation, and technological innovation and information uncertainty related to economics news, the COVID-19 pandemic, and Twitter usage. First, by employing a quantile vector autoregression framework, we assessed how the static and dynamic connectedness between markets switched across a broad spectrum of market conditions, particularly bear, normal, and bull markets. Second, we examined the dynamics of the co-movement between green financial markets and the level of uncertainty in the time-frequency domain using novel vector wavelet coherence analysis. Our analysis yielded the following major findings: Statically, high spillover and volatility effects existed among the indexes; dynamically, evidence of very strong connectedness between climate change indexes was reported at extreme lower and extreme upper quantiles. The findings further exhibit the switching of climate change between net contributing/net receiving shock behavior during the pandemic. Technological innovation, the COVID-19 pandemic, and uncertainty have strong effects on climate change markets as revealed by multiple, quadruple, and vector wavelet analysis. Implications for both environmental investors and policymakers were revealed.

Electoral volatility and political polarization in developing democracies: Evidence from Latin America, 1993–2016

What explains political polarization across developing democracies? In contrast to extant studies, this article develops a novel argument that links electoral (in)stability at the party system level with varying levels of polarization. Specifically, we claim that increasing levels of electoral volatility generate high levels of uncertainty among partisan elites, which respond by setting clear policy positions that are frequently far away from the center in the ideological spectrum. As such, higher levels of volatility engender higher levels of polarization. Further, because the majority of party system change in developing democracies comes mainly from the emergence of new parties, we decompose the effects of stable party system volatility (for established parties) and replacement party system volatility (for newly competing parties) and hypothesize that higher levels of replacement volatility—as opposed to stable volatility—generate higher levels of polarization. Our main theoretical claims find strong qualitative and quantitative support.

Shocks and volatility transmission between oil price and Nigeria's exchange rate.

The study examined shock and volatility transmission between oil price and exchange rate markets using daily data covering the period from 23rd October 2009 to 30th November 2020. The contributions of the paper include (i) implementation of VAR-AGARCH model to capture spillover effect of shock and volatility; (ii) examining the nature of shock impact in oil price and exchange rate market; (iii) adopting of two measured of oil price (WTI and Brent); (iv) employing two measures of the exchange rate (USD/Naira and effective/Naira). The study revealed that past own shocks and volatilities significantly contribute to current volatilities in exchange rate and oil price markets. Also, there is bidirectional shock and volatility spillover between the exchange rate (USD/Naira and effective/Naira) and WTI oil price markets. There were bidirectional shock and volatility spillover between USD/Naira and Brent oil price and unidirectional shock and volatility from Brent oil price to effective exchange rate market. We found asymmetric shocks impacting exchange rates and WTI oil price while symmetric shock was observed in Brent oil price. Including innovation in oil price is essential in exchange rate policy formulation and modelling exchange rate shock and volatility.

CAN INDICATORS FROM ASSET GROWTH , DIVIDEND PAYOUT RATIO AND EARNINGS VOLATILITY M RESOLVE STOCK PRICE VOLATILITY PROBLEMS

This study aims to determine the effect of asset growth , earnings volatility and dividend payout ratio on stock price volatility in non-financial publicly listed companies on the Indonesia Stock Exchange for the 2018-2020 period. The data used are the financial statements of each sample company published on the website www.idx.co.id. The sampling method used is purposive sampling with a total sample of 58 companies. The analytical method used in this study is the causality method, with classical assumption testing, as well as multiple linear regression statistical analysis using SPSS version 25. Based on the results of the study, it can be concluded that partially only asset growth has an effect on stock price volatility. Meanwhile , earnings volatility and dividend payout ratio have no effect on stock price volatility. However, simultaneously asset growth, earnings volatility and dividend payout ratio have an effect on stock price volatility.

Informativeness of trades around macroeconomic announcements in the foreign exchange market

• We study the extent of private information revealed through trades in the foreign exchange market. • We find the intraday variation in the proportion of permanent price variations driven by trade-related information has a repetitive periodic pattern, • We show the information share of private information in trades evolves across trading periods in the FX markets. • We find that, among market participants, heterogeneous interpretation of announcements and opinion disagreement after the announcement are revealed from order flow, and the efficient price is still driven by information implicit in trading activities after the announcement. We study the extent to which private information is revealed through trades in the foreign exchange market. The trade informativeness measured from the VAR framework of trades and quotes allows us to quantify the impact of asymmetric information on return variation. We find the intraday variation in the proportion of permanent price variation driven by trade-related information has a repetitive periodic pattern, and trades in the overlapping trading hours of London and New York carry most information than the other time segments. The results show the fraction of trade-related component to exchange rate variation positively relates to trading volume and reversely relates to effective spread. With a comprehensive set of 48 real-time US, European, and Japanese macroeconomic news surprises variables, and controlling for the effect of trading volume, spread, and volatility, we find news of production-related economic indicator, e.g., GDP and industrial production, has a positive relationship with the trade informativeness in a trading period, suggesting the increased private information share may be attributed to heterogeneous interpretations of the announcement among market participants. Announcement-related information is gradually resolved into the price, and the information is transited via the channel of trading activities.

Monetary Policy and Homeownership: Empirical Evidence, Theory, and Policy Implications

We show that monetary policy affects homeownership decisions and argue that this effect is an important and overlooked channel of monetary policy transmission. We first document that monetary policy shocks are a substantial driver of fluctuations in the U.S. homeownership rate and that monetary policy affects households' housing tenure choices. We then develop and calibrate a two-agent New Keynesian model that can replicate the estimated transmission of monetary policy shocks to homeownership rates and housing rents. We find that the calibrated model provides an explanation to the "price puzzle" and delivers two important results with policy implications. First, the homeownership decision channel amplifies the redistributive effects of monetary policy, with contractionary shocks benefiting more outright homeowners and disadvantaging more renters and homeowners with a mortgage. Second, a monetary authority that reacts to a price index that includes housing rents generates excess house price, rents, and output volatility and larger real effects.

Analisis Volatilitas Arus Kas, Volatilitas Penjualan, Besaran Akrual dan Pengaruhnya Terhadap Persistensi Laba Dengan Book Tax Differences Sebagai Variabel Moderating Pada Perusahaan Industri Barang Konsumsi Yang Terdaftar di Bursa Efek Indonesia

The purpose of this study was to determine the effect of cash flow volatility, sales volatility and accruals on earnings persistence with book tax differences as moderating variables in consumer goods industry companies listed on the Indonesia Stock Exchange (IDX). The research time period used is 5 years, namely the 2016-2020 period. The population of this study includes all consumer goods industrial companies listed on the Indonesia Stock Exchange (IDX) for the 2016-2020 period. The sampling technique used purposive sampling technique. Based on the predetermined criteria obtained 25 companies. The type of data used is secondary data obtained from the Indonesia Stock Exchange website. The analytical method used is panel data regression analysis. The results show that cash flow volatility has an effect on earnings persistence, sales volatility has an effect on earnings persistence, the amount of accruals has no effect on earnings persistence, book tax differences moderate the relationship between cash flow volatility and earnings persistence and cash flow volatility, sales volatility and the amount of accruals on persistence. earnings with book tax differences as the moderating variable.

Improvement of Dynamic Performance in SEIG WECS by Using ANFIS Controller

A new hybrid controller for the Self-Excited Induction Generator (SEIG) driven by the Wind Energy Conversion Scheme (WECS) was proposed in this paper. The dynamic stability of the control grid is essential for both user protection and system performance. There must be a full grasp of the effects of power system volatility to research and govern power systems. The suggested control systems were examined using frequency-domain approaches that focused on the nonlinear design of a device that is subjected to severe faults on a related bus, which was tested using time-domain strategies. In this paper, a novel 3-level inverter is designed and controlled by the ANFIS control for the Dynamic Response of the system at the load side. The ANFIS approach can be used to regulate a self-excited induction generator in this study. The design incorporates wind power to give on-grid electricity access. SEIGs are used to power wind turbines in this project, which generates alternating current (AC) for the grid. The system model uses a rotor reference frame and dynamic vector control for the machine reference model. Wind power voltage and active power are controlled by an ANFIS controller in the converter. The ANFIS controller's performance is evaluated in all abnormal scenarios, including the worst-case scenario. System modeling and simulation in Simulink-Matlab allow it to be used in SEIG configurations. Wind power system quality and stability are both improved by the ANFIS control unit, according to simulation results.

Data revisions and the effects of monetary policy volatility

I quantify the role of data revisions in estimating the impact of monetary policy-induced volatility on business cycle fluctuations. To that end, I construct real-time and final data-based measures of policy volatility. The results suggest that the effects of the two measures are qualitatively similar. However, the impact of real-data volatility on output is lower than that of final data volatility. These findings suggest that the business cycle implications of policy-induced volatility, found in the literature, are possibly overstated.

Stock returns, trading volume, and volatility: The case of African stock markets

The presence of the African Stock Markets (ASMs) in the global frontier markets indices confirms their global portfolio diversification role. This study investigates the asymmetric and intertemporal causality among the stock returns, trading volume, and volatility of eight ASMs. Results based on the linear model reveal that return generally Granger cause trading volume. However, evidence from the quantile regression shows that lagged trading volume has a negative causal effect on returns at low quantiles and positive causal effects at high quantiles. This evidence is consistent with volume-return equilibrium models, disposition and overconfidence models, and information asymmetry models. The positive causal effects of volatility on volume support the dispersion of beliefs model. In contrast, intertemporal evidence of contemporaneous and lagged causal relationships from trading volume to volatility supports the mixture of distribution hypothesis, sequential information acquisition hypothesis, and dynamic efficient market hypothesis. Volume-return and return-volume causality dynamics are quantile-specific and therefore driven by market conditions. However, the volume-volatility causality is dependent on volatility regimes. The linear model results confirm how model misspecification can distort and even reverse empirical evidence relative to nonlinear models.

Volatility spillover effects among crude oil future market, SAR/EUR and Saudi Arabia CDS Market: The evidence of DCC-FIGARCH model

This empirical study examines the time-varying spillover and contagion effects between one major future market, one major FOREX market and six major Islamic CDS markets. We use daily data for crude oil future, SAR/EUR and Saudi Arabia CDS markets. The data spans from February 15, 2011 to August 27, 2020, which entails major economic events. In this paper, we deploy DCC-FIGARCH process. The empirical findings indicate volatility effects spilling over from crude oil future returns to SAR/EUR returns and CDS market returns. Dynamic Conditional Correlations provide empirical evidence of strong contagion effects between the market returns. Conclusions of this paper are of interest to investors diversifying their portfolios of the above markets and to financial derivative markets regulators providing regulations for the under investigation derivative markets.

Oil price volatility forecasting: Threshold effect from stock market volatility

Stock market volatility, which is usually considered a proxy for the general economy, contains important information for the crude oil market. In this paper, we investigate the incremental benefit of stock market volatility over oil volatility using the S&P 500 index and WTI oil prices for the period from January 1990 to December 2021. The threshold autoregressive regression (TAR) model is used to capture the nonlinear threshold effect of stock market shock on oil market volatility. From empirical analysis, both in-sample and out-of-sample results highlight the prediction superiority and effectiveness of the nonlinear threshold regression model, which indicates the valuable strong threshold effects of stock volatility for oil volatility forecasting. Moreover, the additional effects of stock volatility in terms of bad volatility forecasting further confirm the effectiveness of the nonlinear TAR model and the information content of stock volatility. This study will prove useful for policy-makers to formulate reasonable policies and for investors to avoid risk.