Political Risk and Stock Market Volatility PDF Download

Author: Muhammad Tahir Suleman
Publisher: LAP Lambert Academic Publishing
ISBN: 9783845411811
Category : Capital market
Languages : en
Pages : 72

View

Book Description
Research on political risk tends to elucidate that political news affects nancial markets. Especially stock markets respond to new information regarding political decisions that may affect domestic and foreign policy. In this study, we examined the effect of good and bad political news on returns and volatility for this We employ the EGARCH model proposed by Engle and Victor (1991) as it allows good and bad news to have a different impact on volatility.Our result shows that good news has positive impact on the stock returns and also decreased the volatility.On the other hand, bad political news has negative influence on the returns (decrease the returns) and increase the volatility (positive effect)."

Author: Cosset, Jean-Claude
Publisher: Québec : Faculté des sciences de l'administration de l'Université Laval, Direction de la recherche
ISBN: 9782895241652
Category :
Languages : en
Pages : 34

View

Book Description

Author: Muhammad Tahir Suleman
Publisher:
ISBN:
Category :
Languages : en
Pages : 29

View

Book Description
In this paper we propose a framework for predicting market returns and volatility using changes in the country's political risk. We identify the appropriate lag to calculate changes over, and show how the changes should be included in mean and volatility equations. The appropriate level of aggregation for the political risk variable is also examined. We analyse 47 emerging and 21 developed markets. We find political risk predictive power primarily for volatility, when looking at emerging markets. Our paper recommends use of three political risk components, which suitably capture important dimensions of the political environment.

Author: Harold Y. Kim
Publisher:
ISBN:
Category :
Languages : en
Pages : 66

View

Book Description
Little work has been done to characterize the empirical effects of political events on financial markets. In this paper we attempt to measure the impact of political risk on asset prices, focusing on the Hong Kong equity market. Hong Kong serves as the ideal case study, for two reasons: the political situation is fluid, unpredictable, and characterized by the occurrence of definitive events, and the market movements are volatile, partially reflecting the political event risk. We focus on the 1989-1993 period, during which political issues such as the question of Hong Kong s democracy after 1997, China s most-favored-nation trade status, and China s human rights development and political reform movement have all contributed to Hong Kong s stock price movements. Modeling market volatility using a jump-diffusion process finds that the volatility of the benchmark Hang Seng Index is driven by a highly persistent component, punctuated by large jumps which are highly related to political events. These results suggest that the Hong Kong market is affected by both economic and political factors which impact future profitability and investor confidence.

Author: Seungho Jung
Publisher: International Monetary Fund
ISBN: 1557759677
Category : Business & Economics
Languages : en
Pages : 36

View

Book Description
We investigate how corporate stock returns respond to geopolitical risk in the case of South Korea, which has experienced large and unpredictable geopolitical swings that originate from North Korea. To do so, a monthly index of geopolitical risk from North Korea (the GPRNK index) is constructed using automated keyword searches in South Korean media. The GPRNK index, designed to capture both upside and downside risk, corroborates that geopolitical risk sharply increases with the occurrence of nuclear tests, missile launches, or military confrontations, and decreases significantly around the times of summit meetings or multilateral talks. Using firm-level data, we find that heightened geopolitical risk reduces stock returns, and that the reductions in stock returns are greater especially for large firms, firms with a higher share of domestic investors, and for firms with a higher ratio of fixed assets to total assets. These results suggest that international portfolio diversification and investment irreversibility are important channels through which geopolitical risk affects stock returns.

Author: Wei Ying Oon
Publisher:
ISBN:
Category :
Languages : en
Pages : 244

View

Book Description

Author: Dimosthenis Karaflos
Publisher:
ISBN:
Category :
Languages : en
Pages : 14

View

Book Description
The implied volatility of any stock market can be used in order to measure the future expectations of risk and returns. The purpose of this paper is to measure the levels of risk in the Greek stock market for the brief time interval of 02/02/2015-03/31/2015. The reason of choosing this time interval to be examined is that during these dates many political decisions have been made, and as a consequence the uncertainty in Greece was higher with a significant impact in the Eurozone. Thus, it is of great importance to examine the implied volatility of the Greek stock market and measure its' relevance with the implied volatility of the German stock market. The reason that these stock markets have been selected relies on the fact that the German stock market represents the most stable economy of the Eurozone, and on the other hand, the Greek stock market represents the most unstable economy inside the Eurozone. Under these circumstances, the implied volatilities of these stock markets are going to be modeled in order to detect the relationship between them.

Author: Mohamed Alaa eldin Salma
Publisher:
ISBN:
Category : Arab Spring, 2010-
Languages : en
Pages : 84

View

Book Description
Abstract: There is extensive debate on whether political risk is an important factor that influences financial markets and investment decision, especially in developing economies. The main aim of this thesis is to analyze the effect of political risk on stock market returns while controlling for financial risk, economic risk, interest rates and foreign exchange rates. The main methodology involves estimating the model using a regime switching model to account for changes in volatility. The sample period starts from January 2007 to August 2017. The data includes: EGX30 returns over the period, Political risk as proxied by International Country Risk Guide (ICRG) political risk index, economic risk as proxied by International Country Risk Guide (ICRG) economic risk index, financial risk as proxied by International Country Risk Guide (ICRG) financial risk index, Interest rate corridor rate offered by central bank and the Exchange rate between Egyptian pound and US Dollar. The results of the thesis show that political risk proves to be a significant driver for the market returns during high volatility regimes that reflects an unrest in the market, while its impact disappear during stable times.

Author: Greg N. Gregoriou
Publisher: CRC Press
ISBN: 1420099558
Category : Business & Economics
Languages : en
Pages : 654

View

Book Description
Up-to-Date Research Sheds New Light on This Area Taking into account the ongoing worldwide financial crisis, Stock Market Volatility provides insight to better understand volatility in various stock markets. This timely volume is one of the first to draw on a range of international authorities who offer their expertise on market volatility in devel

Author: Deborah B. Beyer
Publisher:
ISBN:
Category : Finance
Languages : en
Pages : 0

View

Book Description
In recent decades, rising economic policy uncertainty coupled with increasing levels of political polarization have impacted financial markets and by extension, investors in those markets. Literature has mainly focused its attention on one of these factors or the other, while few studies to date have examined their joint effects on stock market volatility. Yet politics and the economy are profoundly intertwined; they must be considered in tandem. Through a two-essay format, the objectives of this dissertation are to investigate the combined impact of economic policy uncertainty and partisan conflict on stock market volatility and further, to study the impact of partisan conflict in particular on politically sensitive industry volatility. Findings from Essay 1 provide evidence that economic policy uncertainty increases volatility, whereas partisan conflict reduces it. A deeper examination reveals that partisan conflict’s dampening effect exists only during periods of political gridlock. Essay 2 results show that partisan conflict also reduces industry-level volatility. Moreover, partisan conflict has a greater impact on reducing high politically sensitive industry volatility compared to industries with low political sensitivity. Results from both studies are meant to inform government policymakers, analysts, and investors of the effects these politically-related forces have on equity market volatility.