scholarly journals Research on the Time-Frequency Spillover Effect of High-Frequency Stock Price and Economic Policy Uncertainty

2021 ◽  
Vol 2021 ◽  
pp. 1-18
Author(s):  
Shuzhen Zhu ◽  
Zhen He ◽  
Suxue Wang
Keyword(s):  
Economic Policy ◽  
Hong Kong ◽  
Stock Market ◽  
Frequency Domain ◽  
High Frequency ◽  
Spillover Effects ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty ◽  
Time Frequency ◽  
Hong Kong Stock Market

Through the construction of wavelet coherence analysis and frequency-domain spillover framework, this paper makes a comparative study of the volatility spillover effects of international economic policy uncertainty (EPU) on China’s Shanghai and Hong Kong stock market from a time-frequency perspective. To fully reflect the international EPU, this paper selects China, the United States, Australia, and the United Kingdom and uses the monthly EPU index of these countries and regions. China chooses China’s EPU index and Hong Kong’s EPU index. At the same time, the 5-minute high-frequency volatility of the Shanghai Composite Index (SSEC) and the Hang Seng Index (HSI) is selected to represent the Shanghai and Hong Kong’s stock market, respectively. It is found that there are obvious differences between the EPU and the dependence of the stock market in time domain and frequency domain, and the lead-lag relationship between them has time-varying characteristics. Static and dynamic spillover effects play a dominant role in the analysis of medium- and long-term spillover effects. In particular, the EPU and the risk spillover of the Hong Kong stock market are stronger than those of the Shanghai stock market, and the dynamic frequency-domain net risk spillover between them has frequency characteristics, and there are two-way and asymmetric risk spillovers. This provides a certain reference for policy makers to improve the safety management of financial markets and for market investors to optimize their portfolios.

Mixed frequency domain spillover effect of international economic policy uncertainty on stock market

Kybernetes ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shuzhen Zhu ◽  
Xiaofei Wu ◽  
Zhen He ◽  
Yining He
Keyword(s):  
International Economic ◽  
Economic Policy ◽  
Stock Market ◽  
Frequency Domain ◽  
Time Domain ◽  
Spillover Effect ◽  
Spillover Effects ◽  
Policy Uncertainty ◽  
Content Type ◽  
Economic Policy Uncertainty

Purpose The purpose of this paper is to construct a frequency-domain framework to study the asymmetric spillover effects of international economic policy uncertainty on China’s stock market industry indexes. Design/methodology/approach This paper follows the time domain spillover model, asymmetric spillover model and frequency domain spillover model, which not only studies the degree of spillover in time domain but also studies the persistence of spillover effect in frequency domain. Findings It is found that China’s economic policy uncertainty plays a dominant role in the spillover effect on the stock market, while the global and US economic policy uncertainty is relatively weak. By decomposing realized volatility into quantified asymmetric risks of “good” volatility and “bad” volatility, it is concluded that economic policy uncertainty has a greater impact on stock downside risk than upside risk. For different time periods, the sensitivity of long-term and short-term spillover economic policy impact is different. Among them, asymmetric high-frequency spillover in the stock market is more easily observed, which provides certain reference significance for the stability of the financial market. Originality/value The originality aims at extending the traditional research paradigm of “time domain” to the research perspective of “frequency domain.” This study uses the more advanced models to analyze various factors from the static and dynamic levels, with a view to obtain reliable and robust research conclusions.

scholarly journals Economic Policy Uncertainty and Stock Market Spillovers: Case of Selected CEE Markets

Mathematics ◽  
2020 ◽  
Vol 8 (7) ◽  
pp. 1077 ◽  
Author(s):  
Tihana Škrinjarić ◽  
Zrinka Orlović
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
Spillover Effects ◽  
Policy Uncertainty ◽  
Market Returns ◽  
Stock Market Returns ◽  
Economic Policy Uncertainty ◽  
Dynamic Estimation ◽  
International Investors ◽  
First Time

Rising political and economic uncertainty over the world affects all participants on different markets, including stock markets. Recent research has shown that these effects are significant and should not be ignored. This paper estimates the spillover effects of shocks in the economic policy uncertainty (EPU) index and stock market returns and risks for selected Central and Eastern European markets (Bulgaria, Czech Republic, Estonia, Hungary, Lithuania, Poland, Croatia, Slovakia and Slovenia). Based on rolling estimations of the vector autoregression (VAR) model and the Spillover Indices, detailed insights are obtained on the sources of shock spillovers between the variables in the system. Recommendations are given based on the results both for policymakers and international investors. The contribution of the paper consists of the dynamic estimation approach, alongside allowing for the feedback relationship between the variables of interest, as well as examining the mentioned spillovers for the first time for majority of the observed countries.

scholarly journals Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock Market

Mathematics ◽  
2021 ◽  
Vol 9 (12) ◽  
pp. 1411
Author(s):  
Xiaqing Su ◽  
Zhe Liu
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
Asset Allocation ◽  
Policy Uncertainty ◽  
Volatility Spillover ◽  
Economic Policy Uncertainty ◽  
Long Run ◽  
Transmission Structure ◽  
Long Term Impact

Following generalized variance decomposition, we identify the transmission structure of financial shock among ten sectors in China. Then, we examine whether economic policy uncertainty (EPU) affects it through GARCH-MIDAS regression. We find that consumer discretionary, industrials, and materials sectors are systemically important industries during the sample period. Further research of dynamic analysis shows that each sector acts in a time-varying role in this structure. The results of the GARCH-MIDAS regression indicate that none of the selected EPU indexes has a significant long-term impact on the total volatility spillover of the inter-sector stock market in China. However, the EPUs do affect some sectors’ spillover indexes in the long run, and they are significantly heterogeneous. This paper can provide regulatory suggestions for policymakers and reasonable asset allocation and risk avoidance methods for investors.

The effects of economic policy uncertainty on the macroeconomy and the stock market

2021 ◽  
Author(s):  
Παρασκευή Τζίκα
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
Half Life ◽  
Policy Uncertainty ◽  
Impulse Responses ◽  
Economic Policy Uncertainty

Αφορμή για το θέμα της παρούσας διατριβής υπήρξε η αυξημένη αβεβαιότητα για την οικονομική πολιτική κατά τη διάρκεια της τελευταίας δεκαετίας, και ιδιαίτερα μετά την παγκόσμια οικονομική κρίση και την κρίση στην Ευρωζώνη. Στόχος της διατριβής είναι να ερευνήσει τον δείκτη Αβεβαιότητας για την Οικονομική Πολιτική (Economic Policy Uncertainty, EPU) και τη διάχυσή του (spillover) μεταξύ των χωρών της Ευρωζώνης κατά τη διάρκεια της κρίσης, τις επιδράσεις του στην Ελληνική οικονομία, και τη σχέση του με το χρηματιστήριο. Πιο συγκεκριμένα, ακρογωνιαίος λίθος της παρούσας διατριβής είναι η κατασκευή του δείκτη EPU για την Ελλάδα, σαν μία προσπάθεια ποσοτικοποίησης της ελληνικής οικονομικής αβεβαιότητας. Ο δείκτης EPU κατασκευάστηκε ακολουθώντας τη μεθοδολογία των Baker, Bloom και Davis (2016) και βασίζεται στη συχνότητα δημοσίευσης άρθρων σε εφημερίδες με συγκεκριμένες λέξεις-κλειδιά. Ο ελληνικός δείκτης EPU φαίνεται να αυξάνεται κατά τη διάρκεια σημαντικών διεθνών γεγονότων πριν την κρίση, ενώ μετά την κρίση οι αυξήσεις του δείκτη συνδέονται κυρίως με εγχώρια γεγονότα. Το δεύτερο κεφάλαιο επικεντρώνεται στη διάχυση της αβεβαιότητας μεταξύ των χωρών της Ευρωζώνης. Αναλύοντας 7 χώρες της Ευρωζώνης και αξιοποιώντας τον δείκτη μεταβλητότητας (spillover index) και τους αντίστοιχους δείκτες δυναμικής καθαρής διάχυσης (dynamic net spillover indices), τα αποτελέσματα υποδεικνύουν ότι η συνολική συνδεσιμότητα της αβεβαιότητας (uncertainty connectedness) μεταξύ των χωρών της Ευρωζώνης από 50,5% προ κρίσης μειώνεται στο 30,6% μετά την κρίση. Επίσης, κατά τη διάρκεια της κρίσης οι χώρες της περιφέρεια της Ευρωζώνης «εξάγουν» περισσότερη αβεβαιότητα προς άλλες χώρες σε σύγκριση με πριν την κρίση. Το κεφάλαιο στη συνέχεια εστιάζει στην ελληνική οικονομία, εξετάζοντας τις κυλιόμενες αιφνίδιες αντιδράσεις (rolling impulse responses) του ΑΕΠ, του Δείκτη Οικονομικής Συγκυρίας (Economic Sentiment Indicator), της ανεργίας και του χρηματιστηριακού δείκτη, σε σοκ του ελληνικού και του ευρωπαϊκού δείκτη EPU. Η ανάλυση δείχνει ότι η ελληνική οικονομία επηρεάζεται περισσότερο από σοκ στον εγχώριο παρά στον διεθνή δείκτη αβεβαιότητας. Τα κεφάλαια 3 και 4 αναφέρονται στη σχέση του EPU με το χρηματιστήριο. Συγκεκριμένα, το τρίτο κεφάλαιο επιχειρεί να συσχετίσει τις αναμενόμενες αποδόσεις του χρηματιστηρίου με τις αποκλείσεις από τις θεμελιώδεις τιμές του (fundamentals), δηλαδή χρηματιστηριακές φούσκες, και με τον δείκτη EPU. Το μοντέλο που χρησιμοποιείται φαίνεται ικανό να προβλέψει περιόδους αιφνίδιων κινήσεων του χρηματιστηρίου της Αμερικής (bubble crashes). Επίσης, επιχειρείται η κατασκευή ενός επενδυτικού κανόνα ο οποίος υποδεικνύει στον επενδυτή πότε να βγει από την αγορά και πότε να επανέλθει σε αυτή. Τα αποτελέσματα για τον εν λόγω κανόνα ενισχύουν τη εμπειρική αξία του υποδείγματος, καθώς τα κέρδη του επενδυτή είναι υψηλότερα από ότι αν ακολουθούσε μία απλή στρατηγική με την οποία θα παρέμενε στο χρηματιστήριο καθ΄ όλη τη διάρκεια του δείγματος. Τέλος, το τέταρτο κεφάλαιο εξετάζει τη συνεισφορά του δείκτη EPU στην επιμονήτων σοκ στη μεταβλητότητα του χρηματιστηρίου. Εφαρμόζεται μία πρωτότυπη μεθοδολογία σύμφωνα με την οποία συγκρίνεται η μέση-ζωή (half-life) ενός σοκ σε διμεταβλητό αυτοπαλίνδρομο υπόδειγμα (VAR), όπου ο δείκτης αβεβαιότητας και η μεταβλητότητα του χρηματιστηρίου είναι οι ενδογενείς μεταβλητές, με τη μέση-ζωή (half-life) ενός σοκ στη μεταβλητότητα του χρηματιστηρίου στα πλαίσια του ισοδύναμου μονομεταβλητού αυτοπαλίνδρομου υποδείγματος (ARMA). Χρησιμοποιούνται ημερήσια δεδομένα για το Ηνωμένο Βασίλειο και τις ΗΠΑ και τα αποτελέσματα αποδεικνύουν ότι ο δείκτης EPU όντως συμβάλει στην επιμονή της μεταβλητότητας του χρηματιστηρίου, κάτι το οποίο είναι πιο έντονο στις ΗΠΑ σε σύγκριση με το Ηνωμένο Βασίλειο.

Economic policy uncertainty and stock prices in BRIC countries: evidence from asymmetric frequency domain causality approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mucahit Aydin ◽  
Ugur Korkut Pata ◽  
Veysel Inal
Keyword(s):  
Economic Policy ◽  
Frequency Domain ◽  
Stock Prices ◽  
Policy Uncertainty ◽  
Causality Test ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
Bric Countries ◽  
Causality Tests ◽  
Asymmetric Causality

Purpose The aim of this study is to investigate the relationship between economic policy uncertainty (EPU) and stock prices during the period from March 2003 to March 2021. Design/methodology/approach The study uses asymmetric and symmetric frequency domain causality tests and focuses on BRIC countries, namely, Brazil, Russia, India and China. Findings The findings of the symmetric causality test confirm unidirectional permanent causality from EPU to stock prices for Brazil and India and bidirectional causality for China. However, according to the asymmetric causality test, the findings for China show that there is no causality between the variables. The results for Brazil and India indicate that there is unidirectional permanent causality from positive components of EPU to positive components of stock prices. Moreover, for Brazil, there is unidirectional temporary causality from the negative components of EPU to the negative components of stock prices. For India, there is temporary causality in the opposite direction. Originality/value The reactions of financial markets to positive and negative shocks differ. In this context, to the best of the authors’ knowledge, this study is the first attempt to examine the causal relationships between stock prices and uncertainty using an asymmetric frequency domain approach. Thus, the study enables the analysis of the effects of positive and negative shocks in the stock market separately.

Connectedness Among Economic Policy Uncertainties: Evidence from the Time and Frequency Domain Perspectives

2020 ◽  
Vol 8 (5) ◽  
pp. 401-433
Author(s):  
Jinxin Cui ◽  
Huiwen Zou
Keyword(s):  
Economic Policy ◽  
Financial Crisis ◽  
Spillover Effects ◽  
The United States ◽  
Practical Significance ◽  
Policy Uncertainty ◽  
The Novel ◽  
Short Term ◽  
Economic Policy Uncertainty ◽  
Crisis Period

AbstractThis paper investigates the frequency connectedness among economic policy uncertainties of G20 countries using the novel frequency connectedness proposed by Barunik and Krehlik (2018) which can depict the dynamic connectedness not only over time but also across different frequencies. The empirical results obtained in this paper demonstrate that, firstly, the connectedness among economic policy uncertainties is significant, and the spillover effects during the financial crisis and the post-financial crisis period are stronger than the pre-financial crisis period. Secondly, the United States, France, and Australia are the main net-transmitters of the economic policy uncertainty spillovers while Brazil, Italy, Mexico, and Russia act as the main net-recipients of the spillovers. Thirdly, the major international events may significantly enhance the spillover transmissions of economic policy uncertainty among different countries, thus increasing the magnitude of the total connectedness. Finally, the economic policy uncertainty spillovers are mainly transmitted in the short term, i.e., 1∼4 months instead of longer time horizons in terms of the magnitude of the frequency connectedness measures. The findings of this paper not only have profound theoretical and practical significance but also provide several significant implications for the policymakers, supervision agents, international traders, and various investors.

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