Understanding stock market volatility: What is the role of U.S. uncertainty?

By Zhi Su, Tong Fang, Libo Yin. The North American journal of economics and finance, 2019

119 citations recorded by the source corpus.

Abstract This study investigates the spillover of U.S. economic uncertainty on the stock market volatility of six industrialized and three emerging-market countries, using a bivariate GARCH-MIDAS model. We consider three different U.S. uncertainty indices: economic policy uncertainty (EPU), financial uncertainty (FU), and news implied uncertainty (NVIX). Our results indicate that EPU is positively associated with the industrialized countries’ stock market volatility; FU does not appropriately predict long-term stock market volatility; and NVIX is the more powerful predictor of market volatility, with higher NVIX leading to lower volatility. Our study highlights a new channel of market contagion and furthers our understanding of the sources of stock market volatility.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/3c84878925cb7519b057680f6d2f7f7bf82e009c

Citations in the corpus

• Coronavirus and Oil Price Crash (2020, unknown): “ fact, even the economic policy uncertainty represents a reliable cause of financial markets volatility as shown by Antonakakis et al. (2013), Li et al. (2019), Mei et al. (2018), Phan et al. (2020), Su et al., (2019), Tiwari et al. (2019), Zhenghui and Junhao (2019). 4 Albulescu (2020) already inve”