Economic indicators and stock market volatility in an emerging economy

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By analyzing the daily realized volatility series calculated from intraday stock price observations, this study examines the direct causality between one-day-ahead aggregate stock market volatility and several economic and financial indicators in the Korean market, a leading emerging market. Using the predictive regression and superior predictive ability tests, we find that the model-free implied volatility index (VKOSPI) and stock market indicators both lead the daily market volatility. However, daily economic indicators provide no predictive information beyond that contained in historical volatility. Though in-sample causality does not guarantee a better out-of-sample forecasting performance, the VKOSPI and combinations of predictors exhibit significant predictive ability regardless of the time period. Our study verifies the information role of the VKOSPI as an indicator of daily market risk.
Publisher
ELSEVIER
Issue Date
2020-06
Language
English
Article Type
Article
Citation

ECONOMIC SYSTEMS, v.44, no.2

ISSN
0939-3625
DOI
10.1016/j.ecosys.2020.100788
URI
http://hdl.handle.net/10203/282017
Appears in Collection
MT-Journal Papers(저널논문)
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