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1 – 10 of over 2000Barkha Dhingra, Shallu Batra, Vaibhav Aggarwal, Mahender Yadav and Pankaj Kumar
The increasing globalization and technological advancements have increased the information spillover on stock markets from various variables. However, there is a dearth of a…
Abstract
Purpose
The increasing globalization and technological advancements have increased the information spillover on stock markets from various variables. However, there is a dearth of a comprehensive review of how stock market volatility is influenced by macro and firm-level factors. Therefore, this study aims to fill this gap by systematically reviewing the major factors impacting stock market volatility.
Design/methodology/approach
This study uses a combination of bibliometric and systematic literature review techniques. A data set of 54 articles published in quality journals from the Australian Business Deans Council (ABDC) list is gathered from the Scopus database. This data set is used to determine the leading contributors and contributions. The content analysis of these articles sheds light on the factors influencing market volatility and the potential research directions in this subject area.
Findings
The findings show that researchers in this sector are becoming more interested in studying the association of stock markets with “cryptocurrencies” and “bitcoin” during “COVID-19.” The outcomes of this study indicate that most studies found oil prices, policy uncertainty and investor sentiments have a significant impact on market volatility. However, there were mixed results on the impact of institutional flows and algorithmic trading on stock volatility, and a consensus cannot be established. This study also identifies the gaps and paves the way for future research in this subject area.
Originality/value
This paper fills the gap in the existing literature by comprehensively reviewing the articles on major factors impacting stock market volatility highlighting the theoretical relationship and empirical results.
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João Silva, Lígia Febra and Magali Costa
This study aims to advance knowledge on the direct impact of the investor’s protection level on the stock market volatility, that is, whether investor’s protection is an important…
Abstract
Purpose
This study aims to advance knowledge on the direct impact of the investor’s protection level on the stock market volatility, that is, whether investor’s protection is an important stock market volatility determinant.
Design/methodology/approach
A panel data was estimated using a sample of 48 countries, from 2006 to 2018, totalizing 31,808 observations. To measure stock market volatility and the investor protection level, a generalized autoregressive conditional heteroskedasticity model and the World Bank Doing Business investor protection index were used, respectively.
Findings
The results evidence that the protection of investors’ rights reduces the stock market volatility. This result indicates that a high level of investor protection, which is the result of a better quality of laws and policies in place that protect investor’s rights, promotes the country as a “safe haven.”
Practical implications
The relationship that the authors intend to analyze becomes important, given that investor protection will give outsiders guarantees on the materialization of their investments. This study contributes important knowledge for investors and for the establishment of government policies as a way of attracting investment.
Originality/value
Although there have been a few studies addressing this relationship, to the knowledge, none of them directly analyses the influence of investor protection on the stock market volatility.
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Nenavath Sreenu and Ashis Kumar Pradhan
The stock market has shown fluctuating degrees of volatility because of the recent COVID-19 pandemic in India. The present research aims to investigate the effect of the COVID-19…
Abstract
Purpose
The stock market has shown fluctuating degrees of volatility because of the recent COVID-19 pandemic in India. The present research aims to investigate the effect of the COVID-19 on the stock market volatility, and whether the economic package can control the market volatility or not, measured by a set of certain sector-level economic features and factors such as resilience variables.
Design/methodology/approach
We examine the correlation matrix, basic volatility model and robustness tests to determine the sector-level economic features and macroeconomic factors helpful in diminishing the volatility rising because of the COVID-19.
Findings
The outcomes of this study are significant as policymakers and financial analysts can apply these economic factors to set policy replies to handle the unexpected fluctuation in the stock market in sequence to circumvent any thinkable future financial crisis.
Originality/value
The originality of the paper is to measure the variables affecting the stock market volatility due to COVID-19, and understand the impact of capital market macroeconomic variables and dummy variables to theoretically explain the COVID-19 impact on stock market volatility.
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Given the dearth of thorough summaries in the literature, this systematic review and bibliometric analysis attempt to take a meticulous approach meant to present knowledge on the…
Abstract
Purpose
Given the dearth of thorough summaries in the literature, this systematic review and bibliometric analysis attempt to take a meticulous approach meant to present knowledge on the constantly developing subject of stock market volatility during crises. In outline, this study aims to map the extant literature available on stock market volatility during crisis periods.
Design/methodology/approach
The present study reviews 1,283 journal articles from the Scopus database published between 1994 and 2022, using the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) 2020 flow diagram. Bibliometric analysis through software like R studio and VOSviewer has been performed, that is, annual publication trend analysis, journal analysis, citation analysis, author influence analysis, analysis of affiliations, analysis of countries and regions, keyword analysis, thematic mapping, co-occurrence analysis, bibliographic coupling, co-citation analysis, Bradford’s law and Lotka’s law, to map the existing literature and identify the gaps.
Findings
The literature on the effects of crises on volatility in financial markets has grown in recent years. It was discovered that volatility intensified during crises. This increased volatility can be linked to COVID-19 and the global financial crisis of 2008, as both had massive effects on the world economy. Moreover, we identify specific patterns and factors contributing to increased volatility, providing valuable insights for further research and decision-making.
Research limitations/implications
The present study is confined to the areas of economics, econometrics and finance, business, management and accounting and social sciences. Future studies could be conducted considering a broader perspective.
Originality/value
Most of the available literature has focused on the impact of some particular crises on the volatility of financial markets. The present study is not limited to some specific crises, and the suggested research directions will serve as a guide for future research.
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Zaifeng Wang, Tiancai Xing and Xiao Wang
We aim to clarify the effect of economic uncertainty on Chinese stock market fluctuations. We extend the understanding of the asymmetric connectedness between economic uncertainty…
Abstract
Purpose
We aim to clarify the effect of economic uncertainty on Chinese stock market fluctuations. We extend the understanding of the asymmetric connectedness between economic uncertainty and stock market risk and provide different characteristics of spillovers from economic uncertainty to both upside and downside risk. Furthermore, we aim to provide the different impact patterns of stock market volatility following several exogenous shocks.
Design/methodology/approach
We construct a Chinese economic uncertainty index using a Factor-Augmented Variable Auto-Regressive Stochastic Volatility (FAVAR-SV) model for high-dimensional data. We then examine the asymmetric impact of realized volatility and economic uncertainty on the long-term volatility components of the stock market through the asymmetric Generalized Autoregressive Conditional Heteroskedasticity-Mixed Data Sampling (GARCH-MIDAS) model.
Findings
Negative news, including negative return-related volatility and higher economic uncertainty, has a greater impact on the long-term volatility components than positive news. During the financial crisis of 2008, economic uncertainty and realized volatility had a significant impact on long-term volatility components but did not constitute long-term volatility components during the 2015 A-share stock market crash and the 2020 COVID-19 pandemic. The two-factor asymmetric GARCH-MIDAS model outperformed the other two models in terms of explanatory power, fitting ability and out-of-sample forecasting ability for the long-term volatility component.
Research limitations/implications
Many GARCH series models can also combine the GARCH series model with the MIDAS method, including but not limited to Exponential GARCH (EGARCH) and Threshold GARCH (TGARCH). These diverse models may exhibit distinct reactions to economic uncertainty. Consequently, further research should be undertaken to juxtapose alternative models for assessing the stock market response.
Practical implications
Our conclusions have important implications for stakeholders, including policymakers, market regulators and investors, to promote market stability. Understanding the asymmetric shock arising from economic uncertainty on volatility enables market participants to assess the potential repercussions of negative news, engage in timely and effective volatility prediction, implement risk management strategies and offer a reference for financial regulators to preemptively address and mitigate systemic financial risks.
Social implications
First, in the face of domestic and international uncertainties and challenges, policymakers must increase communication with the market and improve policy transparency to effectively guide market expectations. Second, stock market authorities should improve the basic regulatory system of the capital market and optimize investor structure. Third, investors should gradually shift to long-term value investment concepts and jointly promote market stability.
Originality/value
This study offers a novel perspective on incorporating a Chinese economic uncertainty index constructed by a high-dimensional FAVAR-SV model into the asymmetric GARCH-MIDAS model.
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Deevarshan Naidoo, Peter Brian Denton Moores-Pitt and Joseph Olorunfemi Akande
Understanding which market to invest in for a well-diversified portfolio is fundamental in economies that are highly vulnerable to fluctuations in exchange rates. Extant…
Abstract
Purpose
Understanding which market to invest in for a well-diversified portfolio is fundamental in economies that are highly vulnerable to fluctuations in exchange rates. Extant literature that has considered phenomenon hardly juxtapose the markets. The purpose of this study is to examine the effects of exchange rate volatility on the Stock and Real Estate market of South Africa. The essence is to determine whether the fluctuations in the exchange rate influence the markets prices differently.
Design/methodology/approach
The Generalised Autoregressive Conditional Heteroskedasticity [GARCH (1.1)] model was used in establishing the effect of exchange rate volatility on both markets. This study used monthly South African data between 2000 and 2020.
Findings
The results of this study showed that increased exchange rate volatility increases stock market volatility but decreases real-estate market volatility, both of which revealed weak influences from the exchange rates volatility.
Practical implications
This study has implication for policy in using the exchange rate as a policy tool to attract foreign portfolio investment. The weak volatility transmission from the exchange rate market to the stock and real estate market indicates that there is prospect for foreign investors to diversify their investments in these two markets.
Originality/value
This study investigated which of the assets market, stock or housing market do better in volatile exchange rate conditions in South Africa.
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Shallu Batra, Mahender Yadav, Ishu Jindal, Mohit Saini and Pankaj Kumar
This study aims to examine the impact of institutional investors and their classes on the stock return volatility of an emerging market. The paper also determines the moderating…
Abstract
Purpose
This study aims to examine the impact of institutional investors and their classes on the stock return volatility of an emerging market. The paper also determines the moderating role of firm size, crisis and turnover on such relationships.
Design/methodology/approach
The study covers nonfinancial companies of the Bombay Stock Exchange-100 index that are listed during the study period. The study uses fixed effects and systematic generalized method of moments estimators to look over the association between institutional investors and firms’ stock return volatility.
Findings
The study provides evidence that institutional investors destabilize the Indian stock market. It indicates that institutional investors do not engage in management activities; they earn short-term gains depending on information efficiency. Pressure-insensitive institutional investors have a significant positive relation with stock return volatility, while pressure-sensitive institutional investors do not. The study also reflects that pressure-sensitive institutional investors are underweighted in India, which jointly represents an insignificant nonlinear association between institutional ownership and stocks’ volatility. Furthermore, outcomes reveal that the intersection effect of the crisis, firm size and turnover is positively and significantly related to such relationships.
Research limitations/implications
The outcomes encourage initiatives that keep track of institutional investors in the Indian stock market. To control the destabilizing effect of pressure-insensitive institutional investors, regulators should follow strict regulations on their trading patterns. Moreover, it guides the potential researchers that they should also take into account the impact of other classes of ownership structure or what type of ownership can help in stabilizing or destabilizing the Indian stock market.
Originality/value
Abundant literature studies the relationship between institutional ownership and firm performance in the Indian context. From the standpoint of making management decisions, the return and volatility of stock returns are both different aspects. However, this study examines the effect of institutional ownership and its groups on the volatility of stock return using the panel data estimator, which was previously not discussed in the literature.
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Suresh Kumar Oad Rajput, Amjad Ali Memon, Tariq Aziz Siyal and Namarta Kumari Bajaj
This paper aims to test for volatility spillovers among Islamic stock markets with the exogenous impact of geopolitical risk (GPR) to check the risk transmission among Saudi…
Abstract
Purpose
This paper aims to test for volatility spillovers among Islamic stock markets with the exogenous impact of geopolitical risk (GPR) to check the risk transmission among Saudi Arabia, Malaysia, Indonesia and Turkey. Researchers test for both the symmetric and asymmetric risk transmission.
Design/methodology/approach
For the symmetric response of volatility, the study uses simple generalized autoregressive conditional heteroscedastic (GARCH) and for the asymmetric response of volatility with the exogenous impact of GPR, the exponential GARCH models have been adopted.
Findings
The results suggest spillover effects exist from Turkey to Saudi Arabia, Indonesia to Malaysia and Saudi Arabia and Malaysia to Indonesia. The findings of volatility spillover from GPR to sample countries suggest that only Malaysia and Indonesia experience volatility spillovers from GPR.
Research limitations/implications
The present study is limited to the context of four countries and Islamic equities; the study contributes to the literature on volatility spillover, Islamic finance, GPR and asset pricing.
Practical implications
This study contributes to individual, institutional investors’ policymakers’ knowledge in determining security prices, trading plans, investment hedging and policy regulation.
Social implications
The extant literature disregards the GPR index to examine the volatility spillover effects among Islamic stock markets, which allow researchers to justify the mechanism of risk transmission due to GPR across the Islamic stock market.
Originality/value
To the best of the authors’ knowledge, this is the first research of its type to look at volatility spillover and GPR transmission in Islamic stock markets.
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Godwin Musah, Daniel Domeher and Abubakar Musah
This paper aims to investigate the effect of presidential elections on stock return volatility in five leading stock markets in sub-Saharan Africa.
Abstract
Purpose
This paper aims to investigate the effect of presidential elections on stock return volatility in five leading stock markets in sub-Saharan Africa.
Design/methodology/approach
This paper uses various criteria to select an appropriate generalized autoregressive conditional heteroscedasticity model to estimate the second moment of the return distribution with the inclusion of pre- and post-presidential election dummy variables that capture the effect of presidential elections on stock market volatility.
Findings
The empirical results show that high pre-election uncertainty increases volatility in the Nairobi Stock Exchange, Stock Exchange of Mauritius and the Nigeria Stock Exchange. Furthermore, the results show that volatility in stock return is reduced 90 days after an election in Nigeria and South Africa but increases 90 days after elections in Ghana.
Originality/value
Contrary to the previous studies that are conducted in a single country with focus on specific elections, this paper provides a comparative analysis of presidential elections and stock return volatility in five leading stock markets in sub-Saharan Africa.
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Vivek Bhargava and Daniel Konku
The authors analyze the relationship between exchange rate fluctuations of a number of major currencies and its impact on US stock market returns, as proxied by the S&P 500. Many…
Abstract
Purpose
The authors analyze the relationship between exchange rate fluctuations of a number of major currencies and its impact on US stock market returns, as proxied by the S&P 500. Many studies have explored this topic since the early 1970s with varied results and with no evidence that clearly explains the relationship between exchange rates and stock market returns. This study takes a different look at this hypothesis and investigates the pairwise relationship between various exchange rates and the United States stock market returns (S&P 500 INDEX) from January 2000 to December 2019.
Design/methodology/approach
The authors test the data for unit roots using Phillip-Perron method. They use Johansen cointegration model to determine whether returns on S&P 500 are integrated with S&P 500. They use the VAR/VECM analysis to test whether there are any interdependencies between exchange rates and stock market return. Finally, they use various GARCH models, including the EGARCH and TGARCH models, to determine whether there exist volatility spillovers from exchange rate fluctuations in various markets to the volatility in the US stock market.
Findings
Using GARCH modeling, the authors find volatility in Australian dollar, Canadian dollar and the euro impact market return, and the volatility of Australian dollars and euro spills over to the volatility of S&P 500. They also find that the spillover is asymmetric for Australian dollars.
Research limitations/implications
One of the limitations could be that the authors use different bivariate GARCH models rather than the MV-GARCH models. For future project(s), they plan to do this analysis from the perspective of a European Union or a British investor and use returns in those markets to see the impact of exchange rates on those markets. It would be interesting to know how the relationship will change during periods of financial crises. This could be achieved by employing structural break methodology.
Originality/value
Many studies have explored the relation between stock market returns and exchange rates since the early 1970s with varied results and with no evidence that clearly explains the relationship between exchange rates and stock market returns. This paper contributes by adding to the existing literature on impact of exchange rate on stock returns and by providing a detailed and different empirical analysis to support the results.
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