Emerging stock market volatility and economic fundamentals: the importance of US uncertainty spillovers, financial and health crises

This paper studies the US and global economic fundamentals that exacerbate emerging stock markets volatility and can be considered as systemic risk factors increasing financial stability vulnerabilities. We apply the bivariate HEAVY system of daily and intra-daily volatility equations enriched with...

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Main Authors: Menelaos Karanasos, Stavroula Yfanti, John Hunter
Format: Default Article
Published: 2021
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Online Access:https://hdl.handle.net/2134/16809958.v1
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spelling rr-article-168099582021-04-21T00:00:00Z Emerging stock market volatility and economic fundamentals: the importance of US uncertainty spillovers, financial and health crises Menelaos Karanasos (7198736) Stavroula Yfanti (5472878) John Hunter (1349355) Economic policy uncertainty Emerging markets Financial and health crises Macro-financial linkages Realized variance Uncertainty spillovers <p>This paper studies the US and global economic fundamentals that exacerbate emerging stock markets volatility and can be considered as systemic risk factors increasing financial stability vulnerabilities. We apply the bivariate HEAVY system of daily and intra-daily volatility equations enriched with powers, leverage, and macro-effects that improve its forecasting accuracy significantly. Our macro-augmented asymmetric power HEAVY model estimates the inflammatory effect of US uncertainty and infectious disease news impact on equities alongside global credit and commodity factors on emerging stock index realized volatility. Our study further demonstrates the power of the economic uncertainty channel, showing that higher US policy uncertainty levels increase the leverage effects and the impact from the common macro-financial proxies on emerging markets’ financial volatility. Lastly, we provide evidence on the crucial role of both financial and health crisis events (the 2008 global financial turmoil and the recent Covid-19 pandemic) in raising markets’ turbulence and amplifying the volatility macro-drivers impact, as well.</p> 2021-04-21T00:00:00Z Text Journal contribution 2134/16809958.v1 https://figshare.com/articles/journal_contribution/Emerging_stock_market_volatility_and_economic_fundamentals_the_importance_of_US_uncertainty_spillovers_financial_and_health_crises/16809958 CC BY 4.0
institution Loughborough University
collection Figshare
topic Economic policy uncertainty
Emerging markets
Financial and health crises
Macro-financial linkages
Realized variance
Uncertainty spillovers
spellingShingle Economic policy uncertainty
Emerging markets
Financial and health crises
Macro-financial linkages
Realized variance
Uncertainty spillovers
Menelaos Karanasos
Stavroula Yfanti
John Hunter
Emerging stock market volatility and economic fundamentals: the importance of US uncertainty spillovers, financial and health crises
description This paper studies the US and global economic fundamentals that exacerbate emerging stock markets volatility and can be considered as systemic risk factors increasing financial stability vulnerabilities. We apply the bivariate HEAVY system of daily and intra-daily volatility equations enriched with powers, leverage, and macro-effects that improve its forecasting accuracy significantly. Our macro-augmented asymmetric power HEAVY model estimates the inflammatory effect of US uncertainty and infectious disease news impact on equities alongside global credit and commodity factors on emerging stock index realized volatility. Our study further demonstrates the power of the economic uncertainty channel, showing that higher US policy uncertainty levels increase the leverage effects and the impact from the common macro-financial proxies on emerging markets’ financial volatility. Lastly, we provide evidence on the crucial role of both financial and health crisis events (the 2008 global financial turmoil and the recent Covid-19 pandemic) in raising markets’ turbulence and amplifying the volatility macro-drivers impact, as well.
format Default
Article
author Menelaos Karanasos
Stavroula Yfanti
John Hunter
author_facet Menelaos Karanasos
Stavroula Yfanti
John Hunter
author_sort Menelaos Karanasos (7198736)
title Emerging stock market volatility and economic fundamentals: the importance of US uncertainty spillovers, financial and health crises
title_short Emerging stock market volatility and economic fundamentals: the importance of US uncertainty spillovers, financial and health crises
title_full Emerging stock market volatility and economic fundamentals: the importance of US uncertainty spillovers, financial and health crises
title_fullStr Emerging stock market volatility and economic fundamentals: the importance of US uncertainty spillovers, financial and health crises
title_full_unstemmed Emerging stock market volatility and economic fundamentals: the importance of US uncertainty spillovers, financial and health crises
title_sort emerging stock market volatility and economic fundamentals: the importance of us uncertainty spillovers, financial and health crises
publishDate 2021
url https://hdl.handle.net/2134/16809958.v1
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