Stock Market Volatility Threshold and its Interrelation with the Currency
DOI:
https://doi.org/10.32826/cude.v44i124.280Keywords:
Systemic risk, financial contagion, emerging countries, stock market volatility, VAR analysis, implied volatility, financial crisisAbstract
The evidence of financial globalization and the quicker and more uniform contagion between the different international financial markets has been revealed after the outbreak of the crisis in 2007, as well as the sovereign debt crisis of 2010 and lately the Brexit. In spite of, volatility in the post-crisis subprime period has been low in historical terms. In this study, an estimation of the volatility thresholds for each of the main indexes is carried out in order to determine the possible degrees of contagion along with the degree of volatility interrelation between the financial market and the respective currencies.
References
Augmented, D., and Fuller, W. (1979). “Distribution of the Estimators for Auto-regressive Time Series with a Unit Root”. Journal of the American Statistical Association, Vol. 74, Issue 366a, pp. 427-431.
Basu, S. and B. Bundick (2015). Uncertainty Shocks in a Model of Effective Demand. NBER Working Paper 18420.
Berger, D., I. Dew-Becker and S. Giglio (2016), Contractionary volatility or volatile contractions? Northwestern University Working Paper.
Bloom, N. (2009). The Impact of Uncertainty Shocks. Econometrica 77, 623-685.
Bloom, N., Floetotto, M. Jaimovich, N., Saporta-Eksten, I. and S.J. Terry (2014). Really Uncertain Business Cycles. Working paper.
Bloom, N., S. Baker and S. J. Davis (2015). Measuring Economic Policy Uncertainty. Working paper.
Bustelo, P. (1999). “Globalización Financiera y Riesgo Sistémico: Algunas Implicaciones de la Crisis Asiáticas”. Reunión de Economía Mundial. Huelva
Cortés, A. Raúl. (2014). “Impacto del desarrollo del sistema financiero en el crecimiento económico en países emergentes durante el periodo 2001-2011”. Equidad y Desarrollo, ISSN 1692-7311, No. 22: 99-120.
Danielsson, J. et al., Learning from History: Volatility and Financial Crises (October 2017). Review of Financial Studies, Forthcoming; FEDS Working Paper No. 2016-093.
Demirgüç-Kunt, A., Levine, R., and Beck, T. (2004). “Finance, Inequality, and Poverty: Cross-Country Evidence”. National Bureau of Economic Research, Working Paper No. 10979
Demirgüç-Kunt, A., and Beck, T. (2009). “Financial Institutions and Markets across Countries and over Time”. The World Bank, Development Research Group, Policy Research Working Paper 4943.
Durbin, J. and G.S. Watson (1951). “Testing for serial correlation in least squares regression. II”. Biometrika. 1951 Jun; 38(1-2): 159-78.
Elbaum, S. (2004). “Selecting a Cost-Effective Test Case Prioritization Technique”. Software Quality Journal, Vol. 12, Issue 3, pp. 185-210.
Estévez, Leticia and Cambón, Mª Isabel (2015). “A Spanish Financial Market Stress Index (FMSI)”. Research, Statistics and Publications Department, CNMV.
Forbes, K. and R. Rigobon (2001). “Measuring Contagion: Conceptual and Empirical Issues”. International Financial Contagion, Chapter 3, pp. 43-66.
Forbes, K. and R. Rigobon (2002). “No Contagion, Only Interdependence: Measuring Stock Market Comovements”. The Journal of Finance, Vol. LVII, No.5 October 2002.
Gilchrist, S., J.W. Sim and E. Zakrajek (2014). Uncertainty, Financial Frictions and Investment Dynamics. NBER Working Paper 20038.
Gonzalo, J., and J.Y. Pitarakis (2002). Estimation and model selection based inference in single and multiple threshold models. Journal of Econometrics 110: 319–352.
Hansen, Bruce E. (2000). “Testing for structural change in conditional models”. Journal of Econometric, Elsevier, vol. 97(1), pages 93-115.
Hansen, Bruce E. (1997). “Threshold effects in non-dynamic panels: Estimation, testing and inference”. Boston college working Papers in Economics 365, Boston College Department of Economics.
Hobijn, B., P.H. Franses, and M. Ooms (1998). “Generalizations of the KPSS-test for stationarity”. Econometric Institute Report 9802/A, Econometric institute, Erasmus University Rotterdam.
King, Robert G., and Levine, Ross (1993). “Finance and growth: Schumpeter might be right”. Quarterly Journal of Economics.
Krishnamurthy, A. and Vissing-Jorgensen, A. (2011). “The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy”. National Bureau of Economic Research, Working Paper No. 17555
Kwiatkowski, D., Phillips, P., Schmidt, P. and Shin, S. (1992). “Testing the null hy-pothesis of stationarity against the alternative of a unit root: How sure are we that economic time series have a unit root?”. Journal of Economics, Vol. 54, Issues 1-3, pp. 159-178.
Leduc, S. and Z. Liu (2015). Uncertainty Shocks are Aggregate Demand Shocks, Federal Reserve Bank of San Francisco Working Paper 2012-10.
Linden, A. (2015). Conducting interrupted time-series analysis for single- and multiple-group comparisons. Stata Journal 15: 480–500.
Linden, A. (2017). A comprehensive set of postestimation measures to enrich interrupted time-series analysis. Stata Journal 17: 73–88.
Lo, Andrew W., “What is an Index?” (October 12, 2015). Available at SSRN: https://ssrn.com/abstract=2672755 or http://dx.doi.org/10.2139/ssrn.2672755
Ludvigson, S., S. Ma and S. Ng. (2015). Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response? NBER Working Paper No. 21803.
Metes, D. (2005). “Visual, Unit Root and Stationarity Tests and Their Power and Accuracy”. Department of Mathematical and Statistical Sciences, University of Al-berta.
Mishkin, F. (2009). “Globalization and financial development”. Journal of Development Economics 89, 164-169.
Newey, W. K., and K. D. West (1994). “Automatic lag selection in covariance ma-trix estimation”. Review of Economics Studies 61: 631-653.
Phillips, P., and Perron, P. (1988). “Testing for a Unit Root in Time Series Regres-sion”. Biometrika, Vol. 75, No. 2, pp. 335-346.
Piffaut, Pedro V. and Damià Rey Miró (2017): Integration, Financial Securities, and Contagion Risk: Empirical Evidence for the Period 1995-2016. Lambert Publishing Books, Germany.
Solow, R. (1956). “A Contribution to the Theory of Economic Growth”. The Quar-terly Journal of Economics, Vol. 70, No. 1 (Feb., 1956), pp. 65-94.
Tong, H. (1983). Threshold Models in Non-linear Time Series Analysis. New York: Springer.
Wong, A., and Zhou, X. (2011). “Development of Financial Market and Economic Growth: Review of Hong Kong, China, Japan, The United States and The United Kingdom”. International Journal of Economics and Finance, Vol. 3, No. 2.
Basu, S. and B. Bundick (2015). Uncertainty Shocks in a Model of Effective Demand. NBER Working Paper 18420.
Berger, D., I. Dew-Becker and S. Giglio (2016), Contractionary volatility or volatile contractions? Northwestern University Working Paper.
Bloom, N. (2009). The Impact of Uncertainty Shocks. Econometrica 77, 623-685.
Bloom, N., Floetotto, M. Jaimovich, N., Saporta-Eksten, I. and S.J. Terry (2014). Really Uncertain Business Cycles. Working paper.
Bloom, N., S. Baker and S. J. Davis (2015). Measuring Economic Policy Uncertainty. Working paper.
Bustelo, P. (1999). “Globalización Financiera y Riesgo Sistémico: Algunas Implicaciones de la Crisis Asiáticas”. Reunión de Economía Mundial. Huelva
Cortés, A. Raúl. (2014). “Impacto del desarrollo del sistema financiero en el crecimiento económico en países emergentes durante el periodo 2001-2011”. Equidad y Desarrollo, ISSN 1692-7311, No. 22: 99-120.
Danielsson, J. et al., Learning from History: Volatility and Financial Crises (October 2017). Review of Financial Studies, Forthcoming; FEDS Working Paper No. 2016-093.
Demirgüç-Kunt, A., Levine, R., and Beck, T. (2004). “Finance, Inequality, and Poverty: Cross-Country Evidence”. National Bureau of Economic Research, Working Paper No. 10979
Demirgüç-Kunt, A., and Beck, T. (2009). “Financial Institutions and Markets across Countries and over Time”. The World Bank, Development Research Group, Policy Research Working Paper 4943.
Durbin, J. and G.S. Watson (1951). “Testing for serial correlation in least squares regression. II”. Biometrika. 1951 Jun; 38(1-2): 159-78.
Elbaum, S. (2004). “Selecting a Cost-Effective Test Case Prioritization Technique”. Software Quality Journal, Vol. 12, Issue 3, pp. 185-210.
Estévez, Leticia and Cambón, Mª Isabel (2015). “A Spanish Financial Market Stress Index (FMSI)”. Research, Statistics and Publications Department, CNMV.
Forbes, K. and R. Rigobon (2001). “Measuring Contagion: Conceptual and Empirical Issues”. International Financial Contagion, Chapter 3, pp. 43-66.
Forbes, K. and R. Rigobon (2002). “No Contagion, Only Interdependence: Measuring Stock Market Comovements”. The Journal of Finance, Vol. LVII, No.5 October 2002.
Gilchrist, S., J.W. Sim and E. Zakrajek (2014). Uncertainty, Financial Frictions and Investment Dynamics. NBER Working Paper 20038.
Gonzalo, J., and J.Y. Pitarakis (2002). Estimation and model selection based inference in single and multiple threshold models. Journal of Econometrics 110: 319–352.
Hansen, Bruce E. (2000). “Testing for structural change in conditional models”. Journal of Econometric, Elsevier, vol. 97(1), pages 93-115.
Hansen, Bruce E. (1997). “Threshold effects in non-dynamic panels: Estimation, testing and inference”. Boston college working Papers in Economics 365, Boston College Department of Economics.
Hobijn, B., P.H. Franses, and M. Ooms (1998). “Generalizations of the KPSS-test for stationarity”. Econometric Institute Report 9802/A, Econometric institute, Erasmus University Rotterdam.
King, Robert G., and Levine, Ross (1993). “Finance and growth: Schumpeter might be right”. Quarterly Journal of Economics.
Krishnamurthy, A. and Vissing-Jorgensen, A. (2011). “The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy”. National Bureau of Economic Research, Working Paper No. 17555
Kwiatkowski, D., Phillips, P., Schmidt, P. and Shin, S. (1992). “Testing the null hy-pothesis of stationarity against the alternative of a unit root: How sure are we that economic time series have a unit root?”. Journal of Economics, Vol. 54, Issues 1-3, pp. 159-178.
Leduc, S. and Z. Liu (2015). Uncertainty Shocks are Aggregate Demand Shocks, Federal Reserve Bank of San Francisco Working Paper 2012-10.
Linden, A. (2015). Conducting interrupted time-series analysis for single- and multiple-group comparisons. Stata Journal 15: 480–500.
Linden, A. (2017). A comprehensive set of postestimation measures to enrich interrupted time-series analysis. Stata Journal 17: 73–88.
Lo, Andrew W., “What is an Index?” (October 12, 2015). Available at SSRN: https://ssrn.com/abstract=2672755 or http://dx.doi.org/10.2139/ssrn.2672755
Ludvigson, S., S. Ma and S. Ng. (2015). Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response? NBER Working Paper No. 21803.
Metes, D. (2005). “Visual, Unit Root and Stationarity Tests and Their Power and Accuracy”. Department of Mathematical and Statistical Sciences, University of Al-berta.
Mishkin, F. (2009). “Globalization and financial development”. Journal of Development Economics 89, 164-169.
Newey, W. K., and K. D. West (1994). “Automatic lag selection in covariance ma-trix estimation”. Review of Economics Studies 61: 631-653.
Phillips, P., and Perron, P. (1988). “Testing for a Unit Root in Time Series Regres-sion”. Biometrika, Vol. 75, No. 2, pp. 335-346.
Piffaut, Pedro V. and Damià Rey Miró (2017): Integration, Financial Securities, and Contagion Risk: Empirical Evidence for the Period 1995-2016. Lambert Publishing Books, Germany.
Solow, R. (1956). “A Contribution to the Theory of Economic Growth”. The Quar-terly Journal of Economics, Vol. 70, No. 1 (Feb., 1956), pp. 65-94.
Tong, H. (1983). Threshold Models in Non-linear Time Series Analysis. New York: Springer.
Wong, A., and Zhou, X. (2011). “Development of Financial Market and Economic Growth: Review of Hong Kong, China, Japan, The United States and The United Kingdom”. International Journal of Economics and Finance, Vol. 3, No. 2.
Downloads
Published
2021-03-03
Issue
Section
Articles
License
Those authors who have publications with this journal accept the following terms:
- The authors will retain their copyright and guarantee the journal the right of first publication of their work, which will be simultaneously subject to the Creative Commons Recognition License that allows third parties to share the work whenever its author is indicated and its first publication is this magazine.
- Authors may adopt other non-exclusive licensing agreements for the distribution of the published work (eg, deposit it in an institutional telematic file or publish it in a monographic volume) whenever the initial publication is indicated in this magazine.
- Authors are allowed and advised to disseminate their work through the Internet (eg in institutional telematic files or on their website) before and during the submission process, which can produce interesting exchanges and increase the citations of the published work. (See The effect of open access ).
