Increase In Market Volatility Research Articles

The effect of weather on stock market returns: Evidence from African stock markets

Increasing market volatility and the profound impacts of climate change require a comprehensive understanding of how weather affects stock market performance. This paper aims to investigate the effect of eight weather conditions (clear sky, precipitation, pressure, temperature, relative humidity, specific humidity, wind direction, and wind speed) on the returns of major African stock markets (Botswana, Cote d’Ivoire, Kenya, Mauritius, Morocco, Namibia, Nigeria, Rwanda, South Africa, Tanzania, Tunisia, Uganda and Zambia) over the period from January 2, 1998 to December 30, 2023. Using daily data and a GJR-GARCH (1,1) model with an AR process, the findings reveal that weather conditions influence all African stock markets. Specifically, the markets are categorized according to their sensitivity to weather conditions into three groups: highly affected (5-7 coefficients with 0.001≤ p <0.05), moderately affected (3-4 coefficients with 0.001≤ p <0.05), and slightly affected (1-2 coefficients with 0.001≤ p <0.05). Mauritius and Uganda emerge as the most weather-sensitive countries, with significant impacts (0.001≤ p <0.05) for seven of the eight weather conditions studied. Understanding the relationship between weather conditions and African stock markets enables investors to adjust their strategies and better manage their portfolios to optimize return opportunities. Ultimately, this study provides essential insights for investors, portfolio managers, and financial decision-makers, aiding them in better assessing the risks and opportunities associated with weather conditions in African stock markets, thereby enhancing their decision-making and investment management.

VOTES AND VALUATIONS: THE IMPACT OF LOK SABHA ELECTIONS ON STOCK MARKET

This paper investigates the impact of the 2024 Indian Lok Sabha elections on the stock market, a relationship of significant interest to economists, investors, and policymakers. Given the pivotal role of the Lok Sabha in shaping India's economic policies and legislative landscape, the outcomes of these elections are expected to have substantial implications for market dynamics. Historical data analysis reveals that past elections have consistently led to increased market volatility and activity, reflecting investor sentiment towards political stability and economic policy continuity. This study employs a combination of quantitative and qualitative approaches, including historical data analysis, event studies, and predictive modeling, to forecast potential market reactions. Key factors such as political stability, proposed economic reforms, global economic environment, and investor sentiment are examined to understand their influence on market behavior. The 2024 elections are especially significant as they occur during a period of post-pandemic economic recovery, technological advancements, and evolving geopolitical relations. By analyzing these factors, the paper aims to provide insights into how different election outcomes might affect various sectors, investment strategies, and overall market performance. The findings are intended to aid investors in navigating the election period, making informed decisions, and understanding the broader implications of political events on economic stability and growth. This comprehensive analysis contributes to the existing literature on political economy and market behavior, offering valuable perspectives for stakeholders involved in the Indian financial markets.

The economic consequences of misinformation an analysis of the impact of fake news on stock market volatility during the covid19 pandemic| International Journal of Innovative Science and Research Technology

This paper examines the economic consequences of misinformation on stock market volatility during the COVID-19 pandemic, highlighting how false information significantly disrupted financial markets. The analysis explores specific high-profile cases where misinformation about vaccines, lockdowns, and treatments led to increased market volatility, panic selling, and shifts in investor behaviour. The study delves into the effects on major indices such as the S&P 500 and Dow Jones, revealing the substantial financial losses experienced by retail and institutional investors. It also discusses the regulatory and institutional responses from financial authorities and social media platforms, as well as the challenges they face in curbing misinformation’s rapid spread. The paper concludes with recommendations for enhancing market resilience, emphasising the importance of media literacy, robust fact-checking, and proactive regulatory frameworks to mitigate the impact of misinformation in future crises. This study underscores the ongoing need for vigilant market practices and improved information governance to maintain economic stability.

The Evolution of Futures and Options Markets: From Agricultural Roots to High-Frequency Trading

The evolution of futures and options markets from simple agricultural hedging tools to complex financial instruments has been marked by significant technological advancements, particularly the advent of electronic trading and high-frequency trading (HFT). This paper traces the development of these markets, highlighting key milestones and innovations that have shaped their current form. High-frequency trading, while enhancing liquidity and reducing transaction costs, has also introduced significant challenges, including increased market volatility, the potential for market manipulation, and systemic risks, as seen in events like the 2010 Flash Crash. This research provides a comprehensive analysis of the legal and regulatory frameworks governing futures and options markets, with a focus on both Indian and international contexts. It examines the effectiveness of existing regulations in addressing the challenges posed by modern trading practices and explores the need for continuous adaptation in regulatory approaches. Through a detailed review of relevant case laws, statutory provisions, and scholarly literature, the paper identifies gaps in current regulatory practices and proposes recommendations to enhance market transparency, fairness, and stability. The study concludes that while the evolution of futures and options markets has brought undeniable benefits in terms of efficiency and risk management, these markets must be carefully regulated to mitigate the risks associated with high-frequency and algorithmic trading. Adaptive regulatory frameworks, enhanced transparency measures, and international cooperation are essential for ensuring that these markets continue to contribute positively to the global financial system.

Assessing the impact of the coronavirus pandemic and non-pharmaceutical interventions on Bursa Malaysia KLCI Index using GARCH-M (1,1) models

This study aims to explore the impact of coronavirus pandemic-related variables and non-pharmaceutical interventions on fluctuations in the Malaysian stock market during the period from January 7, 2020, to March 31, 2021. By employing GARCH-M (1,1) family models (GARCH-M, EGARCH-M, and PGARCH-M), the study seeks to understand the intricate dynamics of market volatility amidst the pandemic and associated interventions. The findings suggest that while past market volatility and conditional variance continue to influence current market fluctuations, their effects have diminished over time during the study period. Additionally, the EGARCH-M (1,1) model reveals a leverage effect, indicating increased market volatility following negative news compared to positive news. Interestingly, the EGARCH-M (1,1) model emerges as the optimal choice for accurately capturing data dynamics. Conversely, the PGARCH-M (1,1) model does not exhibit a statistically significant leverage effect. These insights contribute to a better understanding of market behavior during crises, informing future research and risk management strategies. AcknowledgmentThe authors are grateful to the Middle East University, Amman, Jordan, for the full financial support granted to this research paper.

ASEAN-5 Stock Indexes Predictions using Geometric Brownian Motion

Even though the ASEAN-5 region has recently experienced enormous economic growth and advancement, this expansion has been associated with increased market volatility. Analysing historical data to assess stock market performance is crucial to comprehending these markets' dynamics and spotting potential hazards and opportunities. This study seeks to determine the mean and volatility parameters of the Geometric Brownian Motion (GBM) model for stock indexes to see trends and patterns in the ASEAN-5 stock market from 2017 to 2022. Once these parameters are determined, they are used in the GBM model to forecast the stock market indexes. Consequently, this research intends to highlight the value of incorporating GBM into stock indexes and assist investors in making short-term price predictions. The geometric Brownian motion involving randomness, volatility, and drift that might aid investors in making sensible investment decisions will be elaborated on in this research.

Advanced AI Solutions for Securities Trading: Building Scalable and Optimized Systems for Global Financial Markets

Integrating Artificial Intelligence (AI) into securities trading software has revolutionized the financial markets by enhancing scalability, efficiency, and optimization. This paper explores the historical evolution and advancements in AI-driven trading systems, emphasizing their impact on global financial markets. The study investigates how machine learning, deep learning, and other AI technologies enable sophisticated trading strategies, improve market liquidity, and reduce transaction costs. It also addresses the challenges AI integration poses, including decision-making opacity, bias, increased market volatility, and data privacy concerns. The paper argues for the need for scalable architectures, optimization algorithms, and transparent governance to mitigate these issues. Additionally, human oversight remains crucial for evaluating AI outputs and maintaining accountability. This research aims to provide a comprehensive analysis of advanced AI systems in securities trading, highlighting their potential to enhance market efficiency and stability.

The equally weighted portfolio still remains a challenging benchmark

This research replicates the paper “Optimal Versus Naive Diversification: How Inefficient is the 1/N Portfolio Strategy?”, DeMiguel et al. (2009b). Similar to the referring paper, working in the mean–variance context, we compare the out-of-sample performance of the same investment strategies on the basis of standard metrics (Sharpe ratio, certainty equivalent and turnover). We consider proportional transaction costs and estimation rolling windows of limited length. Our study updates the original paper for many interesting aspects. First, to exclude that the empirical evidence of DeMiguel et al. (2009b), whose data stopped in 2004, could depend on very specific market behavior, we use an updated version of the original databases that contains the returns of the last 20 years. Recent data are characterized by a few severe systemic events, the 2008 global financial crisis and the shock related to the pandemic, and a generally higher level of price volatility than the previous periods. In our opinion, this variation in the market’s conditions makes the replication very interesting. Second, we introduce the Equally Risk Contribution (ERC) portfolio within the allocation strategies under comparison. This allocation rule is strictly related to the mean–variance approach when the variance is used as the referring risk measure and it constitutes a very interesting alternative investment benchmark. Moreover, using real data, we study whether a variation of the holding period or the length of the estimation window can modify the performance of all the strategies under comparison. Our findings confirm the results of DeMiguel et al. (2009b), i.e. that the equally weighted portfolio still remains a challenging benchmark to beat. Nevertheless, we find a few significant differences: the number of strategies that outperform naive diversification is larger due to the increased market volatility; limiting the impact of transaction costs by investing in a portfolio with a stable allocation as the ERC, or modifying the lengths of the estimation window and the holding period, is not sufficient to beat naive diversification systematically.

War and Financial Statements: Assessing the Impact of the Russia-Ukraine Conflict on International Accounting and Reporting Standards

Purpose: This study aims to assess the impact of the Russia-Ukraine conflict on international accounting and reporting standards. The focus is on understanding how geopolitical tensions influence regulatory divergence, enforcement challenges, financial reporting practices, and market dynamics. Research Design and Methodology: A qualitative methodology was employed, involving a systematic review of scholarly articles, books, reports, and other academic sources. Data were collected from comprehensive searches on databases like Google Scholar and JSTOR, with thematic analysis used to identify recurring themes and patterns. Triangulation, member checking, and reflexivity ensured the validity and reliability of the findings. Findings and Discussion: The findings reveal that the Russia-Ukraine conflict exacerbates regulatory divergence, complicates enforcement of international accounting standards, and increases complexities in financial reporting. Geopolitical tensions lead to fragmented regulatory responses, undermining efforts toward harmonization. Corporations adopt enhanced risk disclosures and conservative reporting approaches to navigate uncertainties and reassure stakeholders. Investor sentiment and market perceptions are significantly influenced, resulting in increased market volatility and shifts in investment strategies. Implications: This study highlights the need for adaptive regulatory responses and collaborative efforts to promote harmonization of accounting standards. Technological innovations, such as blockchain and artificial intelligence, offer promising avenues for enhancing regulatory compliance and transparency. The findings underscore the importance of interdisciplinary research and longitudinal studies in informing policy interventions, corporate strategies, and regulatory reforms, promoting financial stability, transparency, and resilience in conflict-affected environments.

Reflections on the Practice and Future Prospects of Quantitative Trading in China

Based on experiences both in China and internationally, quantitative trading has shown certain positive effects in enhancing trading efficiency and market liquidity. However, it also poses risks of increasing market volatility under specific market conditions, necessitating guided and regulated development. This paper briefly introduces the characteristics of quantitative trading, reviews its development within China, analyzes its advantages and disadvantages, summarizes recent regulatory requirements, and reflects on its future prospects in China. Suggestions for the next steps in the regulated development of quantitative trading are also proposed.

Ways to achieve a balance in the global oil market under sanctions restrictions

Subject. The article considers the oil market functioning under sanctions restrictions. Objectives. The aims are to determine indicators characterizing the ability of the oil market to resist the sanctions, develop tools to study the impact of sanctions on the stability of the energy market, analyze economic consequences of the embargo on the purchase of oil from some producers, perform an economic analysis of possibilities of achieving equilibrium market conditions under an oil embargo. Methods. The main research tool is mathematical modeling of the market. The methodology rests on the study of changes in the typification of the market, caused by the introduction of sanctions restrictions into its regulatory system. This enables to build a game-theoretic model of the market, suitable for its research in the current state. Results. I determined the main indicators characterizing the global oil market functioning under sanctions, constructed a game-theoretic model, examined the market and determined its critical parameters during the introduction of the embargo on the purchase of oil from some producers. The paper defines ways to stabilize the market under the embargo. Conclusions. The model is suitable for studying the current state of the global oil market. Under the current conditions, attempts by consumer countries to circumvent their own sanctions are possible to stabilize the market, which lead to the introduction of secondary sanctions and an increase in market volatility. It is also feasible to enter into contracts between individual large oil producers and consumers at preferential prices. The study of non-market methods of market regulation, specific to the current market situation, is possible by including consumer countries in the model’s set of players.

Can ETFs affect U.S. financial stability? A quantile cointegration analysis

This study evaluates whether exchange traded funds (ETFs) threaten financial market stability by testing two hypotheses relating the growing importance of ETFs to increased market volatility and rising equity valuations. We estimate quantile cointegration models using Standard & Poor's 500 Index (S&P 500) and Chicago Board Options Exchange volatility Index (VIX) data for 1994–2020. We found that an increase in ETFs is positively and significantly related to the long-term valuation of the S&P 500 for quantile values above the median. By contrast, ETFs have only a negative and significant effect on the VIX for quantiles around the median. Ultimately, two novel results were obtained. First, the distortion in the value of the S&P 500 relative to its fundamentals is driven by investor flow into ETFs during a bull market. Second, the impact of equity ETFs on the VIX is only affected when fundamental factors are in play, decreasing it. Therefore, ETFs contribute to forming equity bubbles and support valuation market dynamics. Both regulators and policymakers should consider these conclusions.

Unleashing the economic and ecological potential of energy flexibility: Attractiveness of real-time electricity tariffs in energy crises

The European energy crisis in 2021 and 2022 emphasized the importance of energy flexibility to mitigate price peaks and manage increased market volatility. Dynamic electricity tariffs are key to unlocking the potential of energy flexibility, as they incentivize flexible consumers to reduce their costs by shifting their load to periods of low prices. We quantify the potential of dynamic tariffs and focus on their economic and ecological potential particularly in energy crises. Using German Day-Ahead spot market data covering 2019 to 2022 as basis for a dynamic tariff, we determine the cost and emission spread between non-flexible and flexible industrial processes. Our results show that energy flexibility together with the real-time electricity tariff lead to energy cost reductions, with relative cost reductions of flexible loads being up to 12 times higher in the energy crisis. Moreover, pre-crisis electricity costs and associated emissions were highly positively correlated, implying flexibilities in real-time electricity tariffs may minimize electricity costs while simultaneously reducing emissions. Based on our results, we conclude that real-time electricity pricing provides a suitable instrument to (1) incentivize necessary investments in energy flexibility, especially in energy crises, and (2) facilitate flexible consumers to reduce costs and emissions at the same time.

Assessment of the impact of inflation on financial losses and real income of Russian enterprises

Aim. To assess the impact of inflation on financial losses and real income of Russian enterprises, as well as to develop recommendations to reduce this negative impact.Objectives. To determine the financial losses of the enterprises of the real sector of the economy from the impact of inflation and inflation risks; to study and evaluate the relationship between changes in inflation and exchange rates at different levels of market volatility; to give recommendations on the choice of the least sensitive to the impact of inflation technologies of settlement with the creditor and obtaining investment income.Methods. The author applied quantitative methods of time and inflation factors accounting, methods of system, logical, situational comparative analysis and financial risk management.Results. Analytical assessments of inflation impact on financial losses, real income and real profitability of Russian enterprises have been obtained. Practical recommendations on the choice of the least inflation-sensitive technologies of settlement with the creditor and obtaining investment income are given. According to the results of the research, evaluation of the interrelation between the changes in inflation and exchange rates, the conditions of application of the theory of purchasing power parity of the national currency of G. Cassel are determined and recommendations are given on forecasting inflationary and currency risks depending on the filling of commodity markets.Conclusions. The quantitative estimates obtained in this article and the developed recommendations are a theoretical and methodological basis for making adequate financial decisions in conditions of increased market volatility, as well as can serve as a basis for the development and implementation of preventive measures aimed at reducing the negative impact of inflation risks.

Shipping alliances under an unexpected shock: Effects on market volatility and social welfare

This paper analyzes the impact of container shipping alliances on the market stability of prices and volumes in the event of an unexpected shock. Given two complementary or substitutable ports in which oligopolistic liners are operating, an alliance between complementary liners, referred to as “global alliance”, enhances their strategic complementarity, which makes shocks more easily propagating among ports and increases volatility of the price and volumes of shipping services. Furthermore, due to incomplete adjustment of production facilities of shippers facing unexpected shocks, the shipping demand in the short term is less elastic than that in the long term. It is shown that the increased market volatility of global alliance causes a greater decline in shippers' benefit under a shock through i) shippers' inefficient investment and ii) an excessive price increase in transportation services, while the liners’ profit may even increase owing to the second effect.

Investor decision making within retirement savings schemes

We study the investment allocation decisions of over 32,000 investors in a retirement savings program using data from 1994 to 2019. Investors exhibit a “reduce risk or increase risk response” when faced with signals of increased market volatility. Investors behave as if they perceive patterns in prices. Different age cohorts display different decision-making “cultures”, but all age groups display a bias towards choosing less risky allocations rather than riskier strategies. Our findings suggest that behavioral biases can contribute to lower superannuation balances being available to people when they retire.

Examining the hedge performance of US dollar, VIX, and gold during the coronavirus pandemic: Is US dollar a better hedge asset?

This study utilizes the hedging potential of the U.S. Dollar Index (USDX) during the COVID-19 period, specifically comparing its positive effects on optimal portfolio weights and hedging ratios with those of traditional hedging assets, such as the VIX and gold. The scalar BEKK GARCH model is employed to forecast volatility and calculate hedging indicators. The results show that USDX exhibits strong hedging abilities against S&P 500 index volatility. These findings highlight the advantageous role of the USDX as a hedging instrument, particularly during periods of heightened market uncertainty, such as during the COVID-19 crisis. Despite the increased market volatility during the COVID-19 pandemic, the value of the optimal portfolio weights is stable and the volatility of the weights is significantly reduced, demonstrating the strength of the USDX's low risk and volatility in hedging against market fluctuations. Moreover, the increase in the hedge ratio indicates that more capital is allocated to hedging, reflecting the increased correlation between the USDX and S&P 500 index. These results emphasize the beneficial role of the USDX as a hedging instrument during times of elevated market uncertainty, such as during the COVID-19 crisis. Ultimately, USDX can provide valuable insights for market participants seeking effective hedging strategies.

Assessing the Impact of the COVID-19 Pandemic on the Saudi Stock Market’s Performance and Sustainability

The research investigates the immediate impact of the COVID-19 pandemic on the Saudi Stock Exchange (Tadawul) by analyzing the Tadawul All Share Index (TASI). Relying on a robust quantitative methodology, the study involved de-seasonalizing daily TASI 'Close' values using a 7-day moving average and employing ARIMA modeling to examine time-series characteristics for periods before and after the first reported case of COVID-19 in Saudi Arabia on March 2, 2020. The study spanned 115 days, with 56 days before and 59 days after the outbreak, resulting in a total of 115 observations. Advanced statistical tests, including a two-sample t-test and effect size calculation (Cohen's d), were conducted to statistically validate the differences in market performance. The findings revealed a significant decrease in TASI performance post-COVID-19, with increased market volatility. This data aligns with global observations of market disruptions during the pandemic and contributes to the understanding of crisis-induced market behaviors. Finally, the obtained results offer valuable insights into the complexities of stock market responses to global health emergencies while further underscoring the importance of considering external factors in market dynamics.
 Keywords: Stock market; COVID-19; financial market; performance; Tadawul; mortality; Saudi Arabia

Comparing the Performance of Developed and Emerging Market Equities during Economic Downturns

Purpose: This study compares developed and developing market stocks during the Russia-Ukraine crisis, a time of high geopolitical tensions. Economic downturns are complicated by geopolitical, financial, and natural disasters. A relevant case study to analyze equities market divergence under geopolitical uncertainty.
 Design/Methodology/Approach: This research quantifies stock market indexes, daily returns, and volatility indicators using historical financial data. Performance indicators, volatility patterns, and risk-return characteristics are compared across established and developing market stocks. The analysis seeks to determine if geopolitical tensions during the war increased market volatility and to understand market segment reactions. The analysis uses cumulative returns, average returns, standard deviations, volatility indexes, and the Sharpe ratio.
 Findings: It is found that clear geopolitical tensions during the crisis affected market volatility differently in established and new economies. This is because industrialized economies are financially stronger than developing ones. The Sharpe ratio allowed detailed market sector comparisons of risk-adjusted returns. This comparison showed investors' possible trade-offs between rewards and dangers.
 Implications/Originality/Value: These findings affect investors seeking educated strategies, politicians creating effective actions, and market participants managing risks. This research improves decision-making and risk management amid economic volatility by evaluating geopolitical events and stock market behaviors.

Financial stability nexus with oil prices shocks and business cycle uncertainty during COVID-19: empirical trends of ASEAN economies.

This study aims to analyze the correlation between financial stability, oil price shocks, and business cycle uncertainty in the economies of the Association of Southeast Asian Nations (ASEAN) amidst the COVID-19 pandemic. This study examines the interplay and effects of various factors on the economic resilience of the ASEAN region, utilizing data from ten-member countries spanning the years 2002 to 2022. The results underscore the notable impact of oil price shocks on financial systems' stability, suggesting that oil price variations have the potential to disrupt financial markets, particularly in the context of the ongoing pandemic. Moreover, the research illustrates that the presence of business cycle uncertainty amplifies the negative consequences of oil price shocks, thereby heightening their influence on the financial system's stability. The study also uncovers a robust correlation between the COVID-19 pandemic and heightened levels of business cycle uncertainty within the ASEAN economies. The ongoing global pandemic has increased market volatility, a deceleration in economic growth, and disruptions in supply chains, generating a heightened sense of uncertainty within the business landscape. As a result, the heightened level of uncertainty has impeded the efficacy of monetary and fiscal policies in preserving financial stability.