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
Subjects:	Economic policy uncertainty Emerging markets Financial and health crises Macro-financial linkages Realized variance Uncertainty spillovers
Online Access:	https://hdl.handle.net/2134/16809958.v1
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id	rr-article-16809958
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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
_version_	1761128842820321280

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

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