Stock Volatility Research Articles

VGC-GAN: A multi-graph convolution adversarial network for stock price prediction

Not only market signals but also disturbances of related companies influence the stock volatility of a company. Currently, most approaches that utilize inter-stock correlations rely on predetermined graphs, such as industry graphs, shareholder graphs, or event graphs, necessitating supplementary financial data. Consequently, this approach often leads to limited generalization ability of the model and incomplete representation of inter-stock relationships. Thus, this study introduces VGC-GAN, a multi-graph convolutional adversarial framework, for predicting stock prices. Initially, the proposed model generates multiple correlation graphs by analyzing historical stock data, providing a comprehensive depiction of inter-stock correlations from diverse perspectives. Subsequently, a Generative Adversarial Network (GAN) framework, augmented with Mean Square Error (MSE) loss, is constructed to enhance the predictive performance of the model. The framework combines Multi-Graph Convolutional Network (Multi-GCN) and Gated Recurrent Unit (GRU) as the generator. It undergoes supervised and adversarial training with Convolutional Neural Network (CNN), facilitating the in-depth exploration of hidden correlations between stocks and time dependence of stocks. To mitigate the impact of noise, VGC-GAN uses subsequences after Variational Mode Decomposition (VMD) with optimized parameters as input to the generator. The proposed model is evaluated on several real datasets, and the experimental results confirm its effectiveness in stock price prediction.

Dynamic Equilibrium with Costly Short-Selling and Lending Market

Abstract We develop a dynamic model of costly stock short-selling and lending market and obtain implications that simultaneously support many empirical regularities related to short-selling. In our model, investors’ belief disagreement leads to shorting demand, whereby short-sellers pay shorting fees to borrow stocks from lenders. Our main novel results are as follows. Short interest is positively related to shorting fee and predicts stock returns negatively. Higher short-selling risk can be associated with lower stock returns and less short-selling activity. Stock volatility is increased under costly short-selling. An application to GameStop episode yields implications consistent with observed patterns.

Volatilitas Imbal Hasil Saham dan Kaitannya dengan Harga Minyak Dunia (Pendekatan Model ARCH/GARCH dan VAR)

Volatility generally refers to the amount of uncertainty or risk associated with changes in a security's value. The value of a security can potentially spread over a wider range of values if it has higher volatility. This study aims to analyze the volatility of stock returns and the growth of world oil prices. The stock that the author analyzes in this scientific article is PT Pakuwon Jati Tbk. by using daily time series data from January 2 2019 to December 14 2020. The model used in this study is Autoregressive Conditional Heteroskedasticity (ARCH)/Generalized Autoregressive Conditional Heteroskedasticity (GARCH), to understand clustering volatility behavior, and Vector Autoregression ( VAR) to determine the dynamic behavior between stock returns and world oil price growth. The results of the study show that stock returns and growth in world oil prices have clustering volatility in both variables. The results of the GARCH model, on the LPwon variable, indicate that when the return variable is not influenced by any variable, the tendency for stock returns tends to decrease, in contrast to the lnbrent variable, which tends to always increase.

Dividend policies and stock volatility-empirical evidence from Middle Eastern stock markets

PurposeThe study aims to explore the relation between dividend policy of any company and its stock volatility.Design/methodology/approachCompanies listed on six GCC stock markets are used in the analysis and the data ranges from 2006 to 2020. Fixed effect and random effect panel data analysis is used to explore the association between stock volatility and the dividend policies.FindingsA significant negative relation is observed between dividend payout and stock volatility. Also, significant negative relation between stock volatility and equity is found, whereas insignificant positive relation is observed between asset growth and stock volatility.Research limitations/implicationsThe data of all listed companies on six GCC markets were not available.Practical implicationsThe question of raising dividend or maintaining at the current level is of utmost importance for the managers of any company before making any investment decisions. Also, the investors look at the dividend announcements as a sort of signal about the future prospect of the company. A stable or fluctuating dividends may be preferred by the investors that ultimately changes the stock price of any company.Social implicationsThe relationship between dividend policy and the volatility of stock price is explored for emerging GCC markets which is the major significance of this paper which will have many social impacts on various stakeholders of any company including investors, regulators and employees, etc.Originality/valueTo the best of the authors’ knowledge, no study for GCC markets is done to establish a relation between stock volatility and the dividend policies which is needed by the academicians to further explore the behavior of these markets.

Some gains are riskier than others: Volatility changes and the disposition effect

I examine whether investors revise their beliefs about a stock's risk due to an increase in the stock's volatility. This revision makes loss-averse investors more willing to sell a riskier stock with a paper gain as the likelihood of having to sell it at a loss later increases. An analysis of a large Finnish dataset on the holdings and trades of individual investors yields empirical support for this prediction: a one standard deviation increase in volatility is associated with an 11% increase in the disposition effect. The effect primarily emerges from investors' increased propensity to sell stocks with small paper gains.

Effects of information related to the Russia-Ukraine conflict on stock volatility: An EGARCH approach

Effects of information related to the Russia-Ukraine conflict on stock volatility: An EGARCH approach

Impacts of environmental uncertainty on investment stocks perception under the holiday effect.

This study explored how the holiday effect impacts the fluctuations in various scale indexes. Using differential and double-difference methods, the researchers of this study analyzed the impact of the lockdown in Wuhan, China on the holiday effect during the COVID-19 pandemic. The research objects used in this study include CSI All Share, CNI1000, CNI 2000, CNI Large Cap., CNI Mid-Cap., and CNI Small Cap. This study found that on behalf of the Chinese market index and the large, medium, and small-scale index, stock volatility is evident on the next day following successive holidays. Meanwhile, greater volatility is observed in small stocks' 4-day vacation (May 1, 11) than in a two-day vacation. The researchers discovered that the sealing effect causes investors to feel uncertain about the increased stock volatility. In terms of size, the net impact of the pandemic on the stock holiday effect is also greater for small stocks than for large stocks. This study's main contribution is the GARCH+DID hybrid method.

The optimal time to buy and hold stock in a reversal

AbstractInvestors cannot anticipate a return reversal in the stock market. Therefore, choosing the optimal time to buy and hold a stock is vital. This paper formulates a disorder problem using the optimal stopping theory to study the optimal time to buy and hold a stock when a downward trend is about to reverse. The results show that investors should buy a stock when the conditional probability of a return reversal hits an optimal boundary for the first time. The optimal boundary is uniquely determined by the stock return, volatility, and the intensity of return reversal. Moreover, the optimal boundary decreases as the stock volatility and the intensity of return reversal increase. We use the China Securities Index 300 (CSI 300), Standard & Poor's 500 (S&P 500), Dow Jones Industrial Average (DJIA), and Russell 2000 indexes to estimate the parameters and the related optimal boundary. We find that the estimated optimal boundary can be used to time stock buying.

CORPORATE GOVERNANCE, CORPORATE SOCIAL RESPONSIBILITY, and FIRM RISK: THE CASE OF INDONESIAN-LISTED FIRMS

Implementation of good corporate governance and CSR need to be considered by companies in achieving more firm values. Those value depending on public interpretation, which is affecting to their stock prices. This research aims to proof linkage among corporate governance, CSR, and firm risk by theoretical and practical implications. Regarding theoretical implications, this study provides a model linking corporate governance, CSR, and firm risk. We use a sample data from 262 Indonesia listed firms and 1,252 firm year observations from 2010 to 2015. Our result show firms that adopt better corporate governance have a lower firm risk. Specifically, higher independent managerial ownership will reduce agency problem by combining their interest. Firms that spend high CSR expenses tend to have less volatile stock prices. This research conduct to provide such an information for corporate and investors to consider and analyze corporate governance and CSR in their decision making. Keywords: Corporate Governance; Corporate social responsibility; Firm Risk; Stakeholder Theory

Indian start-ups going public: return and volatility of stocks during bear and bull regimes

PurposeStart-ups are successful in receiving valuation in billions of US dollars prior to initial public offering (IPO). However, to sustain higher valuation, the stocks need to perform consistently after the IPO. Short-run stock performance of India-based start-ups during the first year of IPO listing from March 2021 to March 2022 is analysed.Design/methodology/approachThe paper deals with the new generation start-ups' stock performance in emerging market in terms of total and abnormal return generated in comparison to the market (NIFTY-200). Further, the volatility of returns during bear and bull regimes is analysed through a family of Markov-switching GARCH models using both normal and skewed distributions.FindingsThe results suggest that start-up stocks are more volatile during bear regime than in the bull run in market-based economies where price limit policy does not apply. Besides, the cumulative abnormal return over the market return was lower for majority of start-up IPO stocks.Social implicationsThough negative returns of the start-up stocks during the first year of IPO need not be surprising, higher volatility during bear regime is a matter of concern as it could severely impact retail investors and founders. The results hold implication for IPO regulation in emerging markets and for retail investors desirous of investing in start-up stocks.Originality/valueVolatility of return is examined using a state-space model during the first year of the start-up IPO listing. The study contributes to the emerging market IPO literature by examining IPO performance in market-based economy. Previous IPO performance studies in emerging markets are predominantly based on ecosystems where start-ups are subjected to price limit policy, and it does not reflect the true nature of IPO performance across emerging markets.

A COMPARISON OF TIME-VARYING VOLATILITY OF ISLAMIC AND CONVENTIONAL STOCK MARKETS IN INDONESIA

Using daily data from January 2003 to December 2021, this paper examines the impact of structural changes on the volatility of Islamic and conventional stocks in Indonesia. Assuming that there are two regimes (regular and turbulence) due to these structural changes and using the MS-GARCH model, this paper finds that the volatility of Islamic and conventional stocks in Indonesia has a different pattern based on the regime. The volatility of Islamic and conventional stocks tends to increase during turbulence compared to regular periods. However, the negative effect of domestic shocks is more significant on stock volatility than on foreign shocks. In addition, this study also found that the response of Islamic and Conventional stocks looks different. This finding implies differences in characteristics between Islamic and conventional stocks responding to structural shocks.

Less is more? New evidence from stock market volatility predictability

The complex nature of stock market volatility has motivated researchers to apply a variety of predictors to obtain reliable predictive information for precise forecasting. This study seeks to examine the effectiveness of the novel Global Financial Uncertainty (GFU) indices, comprising of only five sub-indices, in predicting stock market volatility using the widely used mixed-data sampling (MIDAS) model. The results demonstrate the remarkable and stable predictive power of GFU, even during crises and global financial uncertainty shocks. Specifically, the financial uncertainty index from Europe plays a significant role in our analysis. Importantly, we find that the GFU index outperforms a large number of other indicators in stock volatility forecasting. The statistical and economic significance of the predictive power of GFU is remarkable. Our study provides significant insights for market participants and policymakers that highlight the need to prioritize global financial uncertainty.

How Do Women on Board Reduce a Firm’s Risks to Ensure Sustainable Performance during a Crisis?

The research applies the Upper Echelons Theory and the Lehman Sisters Hypothesis to explain how women board members use investment, financial, and liquidity techniques to reduce risk and increase a firm’s value. An original dataset of listed US companies is analyzed to show how women strategists contribute to value creation and mitigate stock volatility and bankruptcy. A simultaneous equations approach captures the interplay between a company’s use of debt and financial derivatives. According to this research, organizations that employ derivative instruments benefit more from having women in advisory roles because women encourage proactive risk management and develop effective risk control measures. The research implies that businesses should actively promote gender equality on their boards rather than merely recognizing the need for diversity.

From pandemic to war: dynamics of volatility spillover between BRICS exchange and stock markets

Purpose To estimate the volatility of exchange and stock markets and examine its spillover within and across the member countries of BRICS during COVID-19 and the conflict between Russia and Ukraine.Design/methodology/approach The study utilizes the “dynamic conditional correlation-generalized autoregressive conditional heteroskedasticity (DCC-GARCH)” approach of Gabauer (2020). The volatility of the markets is calculated following the approach of Parkinson (1980). The sample dataset comprises the daily volatility of the stock and exchange markets for 35 months, from November 2019 to September 2022.FindingsThe study confirms the existence of contagion effects among member countries. Volatility spillover between exchange and stock markets is low within the country but substantial across borders. Russian contribution increased significantly during the conflict with Ukraine, and other countries also witnessed a surge in the spillover index during the pandemic and war.Research limitations/implications It adds to the body of literature by emphasizing the necessity of comprehending the economies' behavior and interdependence. Offers insightful information to decision-makers who must be more watchful regarding the financial crisis and its regional spillover.Originality/valueThe study is the first to explore the contagion of volatility among the BRICS countries during the two biggest crisis periods of the decade.

Forecasting Volatility Persistence: Evidence from International Stock Markets

Volatility persistence represents a notable feature of financial markets and is a widely studied phenomenon that explores the clustering and leverage effects of stock market returns. Recognizing and incorporating volatility persistence into risk management, asset pricing, and portfolio management strategies provide valuable insights for market participants enabling them to navigate and capitalize on the dynamics of market volatility. The aim of this study was to empirically investigate whether the current high volatility in stock markets are temporal or will persist in the future. An ARCH model and a GARCH model were employed to achieve the aim of this study for the JSE, CAC 40, DAX, Nasdaq and Nikkei 225 from May 29, 2023 to May 29, 2018. The findings revealed that stock market volatility will persist at least for some time from the ARCH and GARCH output results. Active traders and market makers need to adapt their strategies in response to the expected volatility persistence. Higher levels of persistence may call for adjustments such as widening stop-loss orders to accommodate larger price swings or using more extended timeframes to capture sustained trends. Portfolio managers may also opt for strategies that thrive in volatile market conditions such as breakout trading or mean reversion strategies

Impacts of climate pact on global oil and gas sector stocks

PurposeThe purpose of this study is to examine the impacts of the Glasgow Climate Pact on global oil and gas sector stocks. Further, this study also examines if the nations' Climate Change Performance Index (CCPI) and World Energy Trilemma Index (WETI) drive the abnormal returns around the event.Design/methodology/approachThe authors apply the event study analysis to 691 global oil and gas firms across 52 countries. Further, they apply the cross-sectional examination of cumulative abnormal returns (CARs) across 502 firms.FindingsThe emerging markets experienced significant negative abnormal returns on the event day. The CCPI negatively affects longer pre-event CARs, while WETI significantly negatively associates with CARs during longer pre- and post-event windows. Volatility is negatively related to pre- and post-event abnormal returns, while past returns positively drive pre-event period CARs but negatively drive post-event window CARs. This study finds an interesting association between liquidity (CACL) and CARs, as CACL positively drives pre-event CARs, but post-event CARs are negatively associated with CACL. The CARs do not significantly correlate with leverage, size and book-to-market ratio.Practical implicationsThis study's findings on the impact of climate risks on financial markets have significant implications for global regulatory bodies. Policymakers should reduce stock volatility and enhance environmental disclosures by publicly traded companies to accurately price and assess the potential impacts of climate risks. Governments should examine the effects of environmental restrictions on investor behavior, especially in developing countries with limited access to capital. Therefore, policymakers need to consider the far-reaching impacts of environmental regulations while introducing them.Originality/valueClimate risks are expected to impact the global financial market significantly. Prior studies provide limited evidence on how such climate pacts impact the oil and gas sector. Hence, this study, while bridging this gap, provides important implications for policymakers and stakeholders, particularly the emerging markets that are more sensitive.

Non-Financial Disclosure Policies and Their Influence on the Investor Behavior in NYSE-Listed Financial Firms

A country’s accounting and disclosure system is part of its financial system and more generally its institutional infrastructure. Economic theory suggests that, in well-functioning economies, the elements of the institutional infrastructure evolve to fit and reinforce each other. Thus, the accounting system is likely to be geared towards the informational and contracting needs of the key parties in the economy. Due to the existence of private information channels, financial statements are less important in terms of monitoring economic performance and assume other roles, such as determining dividends. However, for this reason, arm’s length or outside investors relying primarily on public disclosures are not as well informed in the German system as they are in Anglo-American economies. Since 2005, listed German groups have been required to prepare their consolidated accounts under International Financial Reporting Standards, IFRSs. The study was a literature based which sought to empirically assess the effect of voluntary non-financial disclosure on performance of financial firms listed on NYSE, United States. The study established that Non-financial reporting by German companies has long been a voluntary matter. As of fiscal year 2017, the CSR Directive Implementation Act makes it mandatory for some 500 large German companies. Non-financial reporting by German companies has long been a voluntary matter. Since the early 2000s, German companies have published non-financial information mostly as CSR or sustainability reports. Publishing comprehensive non-financial information will be mandatory as of fiscal year 2017 for some large German companies as a result of the CSR Directive Implementation Act. The CSR Directive Implementation Act obliges large companies of public interest, in particular, capital market-oriented companies, credit institutions, and insurance companies to publish non-financial information. The study concluded that since stock volatility is linked to information asymmetries and to a higher risk of a company, this analysis implies certain practical implications for both managers and regulators regarding the importance of specific disclosure strategy in capital markets. The study also concluded that the level of disclosed information, the interpretation and the effectiveness of forward-looking information depends on the reputation of a company. Companies disclosing nonfinancial information through sustainability reporting practices provide markets with data on their social, environmental, and governance performance. The study recommended that there is need to have a proper execution of regulatory framework which in turn increases the proper governance disclosures leading to an effective management system. Keywords: Voluntary, non-financial disclosure, performance, financial firms, listed NYSE, United States.

Did the Indian stock market sail the Russia-Ukraine storm safely?

With a sample of 1422 NSE-listed stocks, this study employs the event study method to find the impact of the Russian invasion of Ukraine 2022 on the Indian stock market. Further, cross-sectional regression captures the firm characteristics capable of driving abnormal returns. While the abnormal returns of the Indian stock markets are significant and negative during the pre-invasion period and on the date of military initiation, they are significantly positive during the post-invasion period except on t + 6. The cross-sectional examination of the cumulative abnormal returns with the firm-specific variables indicates that while size, leverage, and BTM negatively impact the pre-invasion abnormal returns, firm liquidity is insignificant; during the post-event period, the past returns and stock volatility positively impact and can predict the abnormal returns. The study provides important implications for policymakers, firms, banks, and investors in managing their financial structure and making informed investment decisions. The findings can also be applied to other emerging markets, serving as a reference for policymakers and contributing to the broader understanding of firms' behavior during crises.

Forecasting Stock Market Volatility via Causal Reasoning

Abstract Studies have shown that Internet financial news has become an important reference for investors in investment behavior. In order to simulate trading experiments that mimic the real stock market, this paper develops a stock volatility prediction model based on causal reasoning. It also gathers and cleans news and stock market data from the Internet, such as opening price, closing price, and change. The findings of the study indicate that the level of stock market volatility can be significantly influenced by online financial news. The proposed model can analyze the effects of news and stock market data in an explainable manner.

The Reaction of the Greek Stock Market to IFRS 16

In this paper, we examine if the implementation of the IFRS 16 about leases had an impact on the stocks traded on Athens Exchange. We use a sample of 79 listed companies to examine whether the prices and the risk of their stocks were affected by the new accounting standard. In doing so, we conduct an event study to estimate abnormal return and volatility of stocks around the publication dates of the sample’s financial statements for year 2019. Similar estimates are prepared for year 2018, which is used as the control year. Afterwards, we compute three representative financial ratios concerning the companies’ profitability, leverage and liquidity. Finally, we check the validity of three assumptions about the impact of IFRS 16 on stock performance and volatility; 1) higher profitability results in higher stock returns and lower volatility, 2) higher leverage ratios, leads to lower stock returns and increased risk, and 3) decreased liquidity results in lower stock returns and increased risk. The empirical findings do not verify these assumptions.