scholarly journals IMPACT OF POLITICAL INSTABILITY AND TERRORISM ON STOCK RETURNS: EVIDENCE FROM PAKISTAN

2013 ◽  
Vol 01 (02) ◽  
pp. 47-54
Author(s):  
Hasan Raza ◽  
Shafaq Malik
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Stock Returns ◽  
Political Instability ◽  
Bad News ◽  
Good News ◽  
Stock Market Volatility ◽  
Egarch Model ◽  
Year 2000 ◽  
The Impact

This study examines the impact of terrorist activities and regime in Pakistan on the return and volatility dynamics of the financial markets in Pakistan between year 2000 and 2010. The study constructs two dummy variables that quantify political instability and terror and examine the effect on stock market volatility. An ARCH and GARCH model to discover evidence that terrorism and regime has a significant impact on both the return and volatility dynamics of stock markets. To capture the asymmetries in terms of negative and positive shocks, this study also uses threshold GARCH (TGARCH) and an exponential GARCH (EGARCH) model. From both of the TGARCH and EGARCH results, it can be reveal that for the return of KSE-100, there are asymmetries in the news that shows bad news has a larger effect on the volatility of return than good news. Finally study of the reaction of the stock market to terrorist events may also provide indication to investors and speculators to adjust their positions when such events transpire.

scholarly journals Asymmetry and Leverage with News Impact Curve Perspective in Australian Stock Returns’ Volatility during COVID-19

2021 ◽  
Vol 14 (7) ◽  
pp. 314
Author(s):  
Najam Iqbal ◽  
Muhammad Saqib Manzoor ◽  
Muhammad Ishaq Bhatti
Keyword(s):  
Stock Returns ◽  
Garch Model ◽  
Bad News ◽  
Good News ◽  
Fiscal Policies ◽  
News Shocks ◽  
Australian Health ◽  
Egarch Model ◽  
Negative Effect ◽  
The Garch Model

This paper studies the effect of COVID-19 on the volatility of Australian stock returns and the effect of negative and positive news (shocks) by investigating the asymmetric nature of the shocks and leverage impact on volatility. We employ a generalised autoregressive conditional heteroskedasticity (GARCH) model and extend the analysis using the exponential GARCH (EGARCH) model to capture asymmetry and allegedly leverage. We proxy the news related to the negative effect of COVID-19 on the Australian health system and its economy as bad news, and on the other hand, measures taken by government economic stimulus packages through their monetary and fiscal policies as good news. The S&P ASX200 (ASX-200) index is used as a proxy to the Australian stock market, and we use value-weighted returns of the stocks listed on ASX-200 for the period 27 January 2020 to 29 December 2020. The empirical results suggest the EGARCH model fits better in capturing asymmetry and leverage than the GARCH model in estimating the volatility of the Australian stock returns. However, another interesting finding is that the EGARCH model with volatility equation without news demonstrates a larger (smaller) leverage effect of the negative (positive) shocks on the conditional volatility compared to its variant with the news.

RESPONSE OF STOCK MARKET DURING COVID-19 AND 2008 FINANCIAL CRISIS: A COMPARATIVE EVIDENCE FROM BRICS NATIONS

2021 ◽  
pp. 1-24
Author(s):  
SANJEEV KUMAR ◽  
JASPREET KAUR ◽  
MOSAB I. TABASH ◽  
DANG K. TRAN ◽  
RAJ S DHANKAR
Keyword(s):  
South Africa ◽  
Financial Crisis ◽  
Stock Market ◽  
Stock Returns ◽  
Stock Markets ◽  
2008 Financial Crisis ◽  
First Case ◽  
Egarch Model ◽  
The 2008 Financial Crisis ◽  
The Impact

This study attempts to examine the response of stock markets amid the COVID-19 pandemic on prominent stock markets of the BRICS nation and compare it with the 2008 financial crisis by employing the GARCH and EGARCH model. First, average and variance of stock returns are tested for differences before and after the pandemic, t-test and F-test were applied. Further, OLS regression was applied to study the impact of COVID-19 on the standard deviation of returns using daily data of total cases, total deaths, and returns of the indices from the date on which the first case was reported till June 2020. Second, GARCH and EGARCH models are employed to compare the impact of COVID-19 and the 2008 financial crisis on the stock market volatility by using the data of respective stock indices for the period 2005–2020. The results suggest that the increasing number of COVID-19 cases and reported death cases hurt stock markets of the five countries except for South Africa in the latter case. The findings of the GARCH and EGARCH model indicate that for India and Russia, the financial crisis of 2008 has caused more stock volatility whereas stock markets of China, Brazil, and South Africa have been more volatile during the COVID-19 pandemic. The study has practical implications for investors, portfolio managers, institutional investors, regulatory institutions, and policymakers as it provides an understanding of stock market behavior in response to a major global crisis and helps them in taking decisions considering the risk of these events.

scholarly journals Financial contagion: The impact of the volatility of global stock exchanges on the Lima-Peru Stock Exchange

2020 ◽  
Vol 1 (1) ◽  
pp. 13-27
Author(s):  
Pedro Pablo Chambi Condori
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Stock Exchange ◽  
Market Volatility ◽  
Financial Contagion ◽  
Stock Market Volatility ◽  
Important Indicator ◽  
Dynamic Correlation ◽  
High Volatility ◽  
The Impact

What happens in the international financial markets in terms of volatility, have an impact on the results of the local stock market financial markets, as a result of the spread and transmission of larger stock market volatility to smaller markets such as the Peruvian, assertion that goes in accordance with the results obtained in the study in reference. The statistical evaluation of econometric models, suggest that the model obtained can be used for forecasting volatility expected in the very short term, very important estimates for agents involved, because these models can contribute to properly align the attitude to be adopted in certain circumstances of high volatility, for example in the input, output, refuge or permanence in the markets and also in the selection of best steps and in the structuring of the portfolio of investment with equity and additionally you can view through the correlation on which markets is can or not act and consequently the best results of profitability in the equity markets. This work comprises four well-defined sections; a brief history of the financial volatility of the last 15 years, a tight summary of the background and a dense summary of the methodology used in the process of the study, exposure of the results obtained and the declaration of the main conclusions which led us mention research, which allows writing, evidence of transmission and spread of the larger stock markets toward the Peruvian stock market volatility, as in the case of the American market to the market Peruvian stock market with the coefficient of dynamic correlation of 0.32, followed by the Spanish market and the market of China. Additionally, the coefficient of interrelation found by means of the model dcc mgarch is a very important indicator in the structure of portfolios of investment with instruments that they quote on the financial global markets.

Herding behavior in Islamic GCC stock market: a daily analysis

2018 ◽  
Vol 11 (2) ◽  
pp. 182-193 ◽  
Author(s):  
Mustapha Chaffai ◽  
Imed Medhioub
Keyword(s):  
Stock Market ◽  
Quantile Regression ◽  
Financial Markets ◽  
Stock Returns ◽  
Stock Markets ◽  
Content Type ◽  
Quantile Regression Analysis ◽  
Herd Behaviour ◽  
The Impact ◽  
Quantile Regression Method

Purpose This paper aims to examine the presence of herd behaviour in the Islamic Gulf Cooperation Council (GCC) stock markets following the methodology given by Chiang and Zheng (2010). Generalized auto regressive conditional heteroskedasticity (GARCH)-type models and quantile regression analysis are used and applied to daily data ranging from 3 January 2010 to 28 July 2016. Results show evidence of herd behaviour in the GCC stock markets. When the data are divided into down and up market periods, herd information is found to be statistically significant and negative during upward market periods only. These results are similar to those reported in some emerging markets such as China, Japan and Hong Kong, where stock returns perform more similarly during down market periods and differently during rising markets. Design/methodology/approach The authors present a brief literature on herd behaviour. Second, the authors provide some specificity of the GCC Islamic stock market, followed by the presentation of the methodology and the data, results and their interpretation. Findings The authors take into account the difference existing in market conditions and find evidence of herding behaviour during rising markets only for GCC markets. This result was confirmed after using the quantile regression method, as evidence of herding was observed only in highly extreme periods. Stock returns perform more similarly when market is down in Islamic GCC stock market. Research limitations/implications The research limitation consists in the fact that this work can be extended to compare the GCC stock markets with other markets in Asia such as Malaysia and Indonesia. Practical implications The principal implication consists in the fact that herding behaviour is limited in the GCC markets and Islamic finance can have an important contribution to moderate the behaviour in the financial markets. Social implications The work focusses on the role of ethics in the financial markets and their ability to reduce the impact of behavioural biases. Originality/value The paper studies the behaviour of investors in the Islamic financial markets and gives an idea about the importance of the behaviour in this particular market regarding its characteristics.

scholarly journals Impact persistence of stock market risks in commodity markets: Evidence from China

PLoS ONE ◽  
2021 ◽  
Vol 16 (11) ◽  
pp. e0259308
Author(s):  
Shusheng Ding ◽  
Zhipan Yuan ◽  
Fan Chen ◽  
Xihan Xiong ◽  
Zheng Lu ◽  
...  
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Market Risk ◽  
Commodity Markets ◽  
Chinese Stock Market ◽  
Stock Market Volatility ◽  
Gold Market ◽  
Shock Impact ◽  
Market Shocks ◽  
The Impact

The risk spillover among financial markets has been noticeably investigated in a burgeoning number of literature. Given those doctrines, we scrutinize the impact persistence of volatility spillover and illiquidity spillover of Chinese commodity markets in this paper. Based on the sample from 2010 to 2020, we reveal that there is a cross-market spillover of volatility and illiquidity in China and also, interactions between volatility and illiquidity in different financial markets are pronounced. More importantly, we demonstrate that different commodity markets have different responsiveness to stock market shocks, which embeds their market characteristics. Specifically, we discover that the majority of the traders in gold market might be hedger and therefore gold market is more sensitive to stock market illiquidity shock and thus the shock impact in persistent. On the other hand, agricultural markets like corn and soybean markets might be dominated by investors and thus those markets respond to the stock market volatility shocks and the shock impact in persistent over 10 periods given the first period of risk shock happening. In fact, different Chinese commodity markets’ responsiveness towards Chinese stock market risk shocks indicates the stock market risk impact persistence in Chinese commodity markets. This result can help policymakers to understand the policy propagation effect according to this risk spillover channel and risk impact persistence mechanism in China.

Are There Asymmetries in the Relationship Between Exchange Rate Fluctuations and Stock Market Volatility in Pacific Basin Countries?

2006 ◽  
Vol 09 (02) ◽  
pp. 229-256 ◽  
Author(s):  
Nabil Maghrebi ◽  
Mark J. Holmes ◽  
Eric J. Pentecost
Keyword(s):  
Stock Market ◽  
Market Volatility ◽  
Bad News ◽  
Good News ◽  
Pacific Basin ◽  
Stock Market Volatility ◽  
Currency Markets ◽  
Dynamic Relationship ◽  
Exchange Rate Fluctuations ◽  
Asymmetric Impact

This paper examines asymmetries in the dynamic relationship between foreign exchange fluctuations and stock market volatility in Pacific basin countries. The methodology is based on a dynamic covariance modelling that accounts for leverage effects and the asymmetric impact of currency fluctuations. There is evidence that appreciations are more conducive to lower volatility in currency markets than depreciations of equal magnitude. Market volatility tends to be ceteris paribus, more sensitive to bad news about equity than good news and more responsive to currency depreciations than appreciations. The results also suggest that bad news about equity accompanied with currency depreciations are likely to generate higher volatility in currency markets and have the potential of affecting the significance of leverage effects in stock markets.

scholarly journals Political news and stock market reactions: evidence from Turkey over the period 2008–2017

2019 ◽  
Vol 55 (2) ◽  
pp. 83-98
Author(s):  
Sleiman Karime ◽  
Özlem Sayilir
Keyword(s):  
Stock Market ◽  
Stock Return ◽  
Global Financial Crisis ◽  
Primary Objective ◽  
Bad News ◽  
Good News ◽  
Market Reactions ◽  
Political News ◽  
The Guardian ◽  
The Impact

Abstract The primary objective of the study is to examine the impact of political news (good and bad news) on the returns and volatility of Borsa Istanbul 100 Index (BIST-100). Sample data cover the period from January 2008 to December 2017. The main sample was divided into two subperiods to insulate the dominating impacts of both the 2008 Global Financial Crisis and 2013 Federal Reserve Tapering on Turkish stock markets. The daily stock market data were collected from the Electronic Data Delivery System (EVDS) web service, while political news headlines were collected from the Guardian newspaper. Different nonlinear volatility models (symmetric and asymmetric Generalized AutoRegressive Conditional Heteroskedasticity [GARCH]-type models) were used to model and estimate BIST-100 volatility in response to political news. The findings of the paper highlight four main results. First, there seems to be a significant impact of political news on the returns and volatility of BIST-100 index. Second, negative shocks derived from bad news tend to have a significant impact on the returns and volatility of BIST-100, while positive shocks derived from good news do not tend to have any significant impact on the returns, but decreased returns volatility. Third, political news, both good and bad, can affect stock return and stock return volatility in different directions, and this direction is time-varying. Fourth, the findings strongly reveal the presence of “Leverage Effect” in the returns of BIST-100 index. Therefore, one can say that political uncertainty is still a problem for the Turkish stock market.

scholarly journals The Impact Of Political Instability Driven By The Tunisian Revolution On Stock Market Volatility: Evidence From Sectorial Indices

2018 ◽  
Vol 34 (2) ◽  
pp. 339-354 ◽  
Author(s):  
Salma Zaiane
Keyword(s):  
Stock Exchange ◽  
Bad News ◽  
Good News ◽  
Stock Market Volatility ◽  
Asymmetric Effect ◽  
Political News ◽  
Stock Indices ◽  
Terrorist Acts ◽  
Tunisian Revolution ◽  
The Impact

The aim of this paper is to study the impact of political uncertainty, driven by the Tunisian Revolution, on return and volatility of major sectorial stock indices in the Tunisian Stock Exchange. We specifically use EGARCH (1.1) model from 01/12/2010 to 31/08/2016. This model is applied to the daily returns relevant to ten sectorial stock indices and to the Tunisian benchmark index (TUNINDEX). To test the impact of political news on returns and volatility, we divided them into two groups (good and bad news). Our results show that both of good and bad news have increased the volatility of major selected indices, including the TUNINDEX. However, the return of all indices are not affected by the political news. We then examined the impact of terrorism on the behavior of indices return and volatility. Results show that the Tunisian market responds significantly to terrorist acts. Hence, the return declines and the volatility increase the day of terrorist attacks. Furthermore, results confirm that bad news have stronger effect on the volatility than good news, which reveal the asymmetric effect of volatility.

scholarly journals A study on the asymmetry of the news aspect of the stock market: Evidence from three institutional investors in the Taiwan stock market

2015 ◽  
Vol 62 (3) ◽  
pp. 361-383 ◽  
Author(s):  
Tzu-Yi Yang ◽  
Yu-Tai Yang
Keyword(s):  
Stock Market ◽  
Institutional Investors ◽  
Bad News ◽  
Good News ◽  
Institutional Trust ◽  
Investment Behavior ◽  
Entire Sample ◽  
Daily Data ◽  
Foreign Institutional Investors ◽  
The Impact

This paper uses daily data to investigate the behavior of institutional investors in Taiwan?s stock market. We adopted TGARCH and EGARCH models to test various news. We found that, for the entire sample, a significant clustering phenomenon exists in the investment behavior of three institutional investors, and the impact due to a change of news content shows significant asymmetry and leverage effects. That is, the impact of bad news from the market is stronger than that of good news. In addition, an asymmetric phenomenon can also be seen for the international news aspect as responded to by foreign institutional investors. This phenomenon is more significant than those of the dealers and institutional trust investors. Moreover, the asymmetric phenomenon as responded to by the dealers for domestic news is more significant than those of foreign investors and institutional trust investors.

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