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The effects of macroeconomic variables on Asian stock market volatility: A GARCH MIDAS approach

Hoang, Duc Hong LU (2015) NEKP03 20151
Department of Economics
Abstract
This paper aims to investigate the effects of macroeconomic variables on stock market volatility in three Asian countries by applying GARCH MIDAS model. The study covers the period from 01/2003 to 06/2014. The GARCH MIDAS framework allows to incorporate macro variables directly in the model and obtain long-term and short-term volatility separately. Empirical findings show that some macroeconomic variables significantly affect stock market volatility. While Chinese and South Korean stock market reacts to either inflation or industrial production growth information, Japanese stock market is sensitive to both factors. In addition, macroeconomic factors influence three markets at different magnitude. The results also indicate that three... (More)
This paper aims to investigate the effects of macroeconomic variables on stock market volatility in three Asian countries by applying GARCH MIDAS model. The study covers the period from 01/2003 to 06/2014. The GARCH MIDAS framework allows to incorporate macro variables directly in the model and obtain long-term and short-term volatility separately. Empirical findings show that some macroeconomic variables significantly affect stock market volatility. While Chinese and South Korean stock market reacts to either inflation or industrial production growth information, Japanese stock market is sensitive to both factors. In addition, macroeconomic factors influence three markets at different magnitude. The results also indicate that three markets behave differently to the same factors. Real oil price shock stems from aggregate demand significantly lowers Japanese stock market volatility. In contrast, South Korean and Chinese stock market volatility is positively influenced by the same shocks. (Less)
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author
Hoang, Duc Hong LU
supervisor
organization
course
NEKP03 20151
year
type
H2 - Master's Degree (Two Years)
subject
keywords
China, South Korea, Japan, volatility, GARCH MIDAS, inflation, industrial production, oil price shocks
language
English
id
5469816
date added to LUP
2015-06-29 13:04:11
date last changed
2015-06-29 13:04:11
@misc{5469816,
  abstract     = {This paper aims to investigate the effects of macroeconomic variables on stock market volatility in three Asian countries by applying GARCH MIDAS model. The study covers the period from 01/2003 to 06/2014. The GARCH MIDAS framework allows to incorporate macro variables directly in the model and obtain long-term and short-term volatility separately. Empirical findings show that some macroeconomic variables significantly affect stock market volatility. While Chinese and South Korean stock market reacts to either inflation or industrial production growth information, Japanese stock market is sensitive to both factors. In addition, macroeconomic factors influence three markets at different magnitude. The results also indicate that three markets behave differently to the same factors. Real oil price shock stems from aggregate demand significantly lowers Japanese stock market volatility. In contrast, South Korean and Chinese stock market volatility is positively influenced by the same shocks.},
  author       = {Hoang, Duc Hong},
  keyword      = {China,South Korea,Japan,volatility,GARCH MIDAS,inflation,industrial production,oil price shocks},
  language     = {eng},
  note         = {Student Paper},
  title        = {The effects of macroeconomic variables on Asian stock market volatility: A GARCH MIDAS approach},
  year         = {2015},
}