Macroeconomic volatility and stock market volatility, worldwide
National Bureau of Economic Research, 2008 - Business & Economics - 13 pages
Notwithstanding its impressive contributions to empirical financial economics, there remains a significant gap in the volatility literature, namely its relative neglect of the connection between macroeconomic fundamentals and asset return volatility. We progress by analyzing a broad international cross section of stock markets covering approximately forty countries. We find a clear link between macroeconomic fundamentals and stock market volatilities, with volatile fundamentals translating into volatile stock markets.
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43 countries asset market volatility Bollerslev causality Colombia consumption expenditures consumption growth volatility cross section Database developing countries deviations of residuals Diebold Economics F-statistics Figure fitted curve fitted to annual fundamental volatility fundamentals and stock GDP growth volatility GDP per capita Global Insight Granger cause Hang Seng Index IMF's International Financial initial GDP International Financial Statistics kernel density estimates link between fundamental log standard deviations macroeconomic macroeconomic fundamentals Malaysia market and fundamental models fitted nonparametric regression fit number of countries OECD quarterly data real consumption growth real GDP growth real stock market real stock return regression fit superimposed relationship between stock residuals from AR(3 scatterplot of real Schwert's show a scatterplot Stock Index stock market index stock market volatility stock return volatility subscriptions Taiwan three lags underlying annual data volatilities are log volatility against initial volatility against real volatility and fundamental volatility and real volatility RV WRDS