Energy-related uncertainty and international stock market volatility

Loading...
Thumbnail Image

Authors

Salisu, Afees A.
Ogbonna, Ahamuefula E.
Gupta, Rangan
Bouri, Elie

Journal Title

Journal ISSN

Volume Title

Publisher

Elsevier

Abstract

This paper predicts the daily return volatility of 28 advanced and developing stock markets using monthly metrics of the corresponding country and global energy-related uncertainty indexes (EUIs) recently proposed in the literature. Using data in their “natural” frequencies to avoid aggregation bias, the results show that country-specific and global EUIs have predictive powers for stock returns volatility for the in-sample periods, with increased levels of EUIs exhibiting the tendency to heighten volatility. This predictability also withstands various out-of-sample forecast horizons, implying that EUI is a statistically relevant predictor in the out-of-sample analysis. The forecast precision of the GARCH-MIDAS model is improved by incorporating global EUIs relatively more than country-specific EUIs. The robustness of the findings with respect to the choice of EUI and sample definition is further confirmed. The outcomes have important policy implications for the concerned stakeholders who are concerned with stability in the global financial system and economy.

Description

Keywords

Energy-related uncertainty indexes (EUIs), Monthly energy-related uncertainty index, Daily stock returns volatility, Developed economies, Developing economies, GARCH-MIDAS, Generalized autoregressive conditional heteroskedasticity (GARCH), Mixed data sampling (MIDAS), Predictions, SDG-08: Decent work and economic growth

Sustainable Development Goals

SDG-08:Decent work and economic growth

Citation

Salisu, A.A., Ogbonna, A.E., Gupta, R. et al. 2024, 'Energy-related uncertainty and international stock market volatility', Quarterly Review of Economics and Finance, vol. 95, pp. 280-293, doi : 10.1016/j.qref.2024.04.005.