Structural transmissions among investor attention, stock market volatility and trading volumes

Volatility is the most widespread measure of risk. Volatility modeling allows investors to capture potential losses and investment opportunities. This work aims to examine the impact of the two waves of COVID-19 infections on the return and volatility of the stock market indices of the euro area countries. The study also focuses on other important aspects such as time-varying risk premium and leverage effect. This investigation employed the Threshold GARCH(1,1)-in-Mean model with exogenous dummy variables. Daily returns of the euro area stock markets indices from 4th January 2016 to 31st December 2020 has been used for the analysis. The results reveal that euro area stock markets respond differently to the COVID-19 pandemic. Specifically, the first wave of COVID-19 infections had a notable impact on stock market volatility of euro area countries with middle-large financial centres while the second wave had a significant impact only on stock market volatility of Belgium.

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Stock Market Volatility and Terrorism: New Evidence from the Markov Switching Model

Peace Economics Peace Science and Public Policy ◽

10.1515/peps-2020-0005 ◽

2020 ◽

Vol 0 (0) ◽

Author(s):

Faheem Aslam ◽

Hyoung-Goo Kang ◽

Khurrum Shahzad Mughal ◽

Tahir Mumtaz Awan ◽

Yasir Tariq Mohmand

Keyword(s):

Stock Market ◽

Significant Risk ◽

Market Volatility ◽

Terrorist Attacks ◽

Stock Market Volatility ◽

Markov Switching Model ◽

Physical Damage ◽

Stock Market Returns ◽

Switching Model ◽

The Impact

AbstractTerrorism in Pakistan poses a significant risk towards the lives of people by violent destruction and physical damage. In addition to human loss, such catastrophic activities also affect the financial markets. The purpose of this study is to examine the impact of terrorism on the volatility of the Pakistan stock market. The financial impact of 339 terrorist attacks for a period of 18 years (2000–2018) is estimated w.r.t. target type, days of the week, and surprise factor. Three important macroeconomic variables namely exchange rate, gold, and oil were also considered. The findings of the EGARCH (1, 1) model revealed that the terrorist attacks targeting the security forces and commercial facilities significantly increased the stock market volatility. The significant impact of terrorist attacks on Monday, Tuesday, and Thursday confirms the overreaction of investors to terrorist news. Furthermore, the results confirmed the negative linkage between the surprise factor and stock market returns. The findings of this study have significant implications for investors and policymakers.

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