Megaritis, A, Vlastakis, N and Triantafyllou, A (2021) Stock market volatility and jumps in times of uncertainty. Journal of International Money and Finance, 113 (102355). ISSN 0261-5606

[thumbnail of 64_MVT_title.pdf]
Preview
Text
64_MVT_title.pdf - Accepted Version

Download (2MB) | Preview

Abstract

In this paper we examine the predictive power of latent macroeconomic uncertainty on US stock market volatility and jump tail risk. We find that increasing macroeconomic uncertainty predicts a subsequent rise in volatility and price jumps in the US equity market. Our analysis shows that the latent macroeconomic uncertainty measure of Jurado et al. (2015) has the most significant and long-lasting impact on US stock market volatility and jumps in the equity market when compared to the respective impact of the VIX and other popular observable uncertainty proxies. Our study is the first to show that the latent macroeconomic uncertainty factor outperforms the VIX when forecasting volatility and jumps after the 2007 US Great Recession. We additionally find that latent macroeconomic uncertainty is a common forecasting factor of volatility and jumps of the intraday returns of S&P 500 constituents and has higher predictive power on the volatility and jumps of the equities which belong to the financial sector. Overall, our empirical analysis shows that stock market volatility is significantly affected by the rising degree of unpredictability in the macroeconomy, while it is relatively immune to shocks in observable uncertainty proxies.

Item Type: Article
Additional Information: The final version of this article and all relevant information related to it, including copyrights, can be found on the publisher website.
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
Divisions: Faculty of Humanities and Social Sciences > Keele Business School
Depositing User: Symplectic
Date Deposited: 01 Feb 2023 08:35
Last Modified: 01 Feb 2023 08:35
URI: https://eprints.keele.ac.uk/id/eprint/11874

Actions (login required)

View Item
View Item