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Stock Market Volatility - Do macroeconomic variables affect stock market volatility?

Falkberg, Ana-Maria LU (2012) NEKM01 20112
Department of Economics
Abstract
The purpose of this thesis is to analyze whether macroeconomic variables affect the stock market volatility defined as the volatility of S&P 500 index returns. Except for seasonal dummies, seven variables are used to explain the stock market volatility: default spread, volatility of inflation, volatility of Industrial production, implied volatility, slope of the yield curve, volatility of 3-months treasury bills and S&P500 returns. The data covers the time period 1957M01-2011M08 and 1990M02-2011M08 with monthly observations. Empirical results are obtained by applying vector autoregressive models (VAR), granger causality and other econometrics methods. Macroeconomic variables are found to affect stock market volatility. Business cycle... (More)
The purpose of this thesis is to analyze whether macroeconomic variables affect the stock market volatility defined as the volatility of S&P 500 index returns. Except for seasonal dummies, seven variables are used to explain the stock market volatility: default spread, volatility of inflation, volatility of Industrial production, implied volatility, slope of the yield curve, volatility of 3-months treasury bills and S&P500 returns. The data covers the time period 1957M01-2011M08 and 1990M02-2011M08 with monthly observations. Empirical results are obtained by applying vector autoregressive models (VAR), granger causality and other econometrics methods. Macroeconomic variables are found to affect stock market volatility. Business cycle variables, describing economic activity and implied volatility influence stock market volatility. The results also prove the existence of seasonal patterns and asymmetric volatility. There is no evidence of an interaction between macroeconomic volatility and stock market volatility. (Less)
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author
Falkberg, Ana-Maria LU
supervisor
organization
course
NEKM01 20112
year
type
H1 - Master's Degree (One Year)
subject
keywords
Volatility, vector autoregressive model, implied volatility, macroeconomic variables
language
English
id
2334322
date added to LUP
2012-02-13 10:55:10
date last changed
2012-02-13 10:55:10
@misc{2334322,
  abstract     = {The purpose of this thesis is to analyze whether macroeconomic variables affect the stock market volatility defined as the volatility of S&P 500 index returns. Except for seasonal dummies, seven variables are used to explain the stock market volatility: default spread, volatility of inflation, volatility of Industrial production, implied volatility, slope of the yield curve, volatility of 3-months treasury bills and S&P500 returns. The data covers the time period 1957M01-2011M08 and 1990M02-2011M08 with monthly observations. Empirical results are obtained by applying vector autoregressive models (VAR), granger causality and other econometrics methods. Macroeconomic variables are found to affect stock market volatility. Business cycle variables, describing economic activity and implied volatility influence stock market volatility. The results also prove the existence of seasonal patterns and asymmetric volatility. There is no evidence of an interaction between macroeconomic volatility and stock market volatility.},
  author       = {Falkberg, Ana-Maria},
  keyword      = {Volatility,vector autoregressive model,implied volatility,macroeconomic variables},
  language     = {eng},
  note         = {Student Paper},
  title        = {Stock Market Volatility - Do macroeconomic variables affect stock market volatility?},
  year         = {2012},
}