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The Effects of Economic Variables on Swedish Stock Market Volatility A GARCH-MIDAS Approach

Kejlberg, Sebastian LU (2018) NEKP03 20162
Department of Economics
Abstract
This thesis applies the GARCH-MIDAS model to investigate the effects of macroeconomic variables, sentimental indicators, and financial variables on Swedish stock market volatility for the period January 2002 to December 2016. The GARCH-MIDAS framework allows the incorporation of data at different frequencies into the same model and decomposes volatility into two components. A short-term component and a long-term component of volatility. The findings show that some of the investigated variables affect stock market volatility. Among the investigated variables, the realized volatility is, in terms of variance ratios, considered the best determinant of volatility, followed by the level specification of the producer price index, unemployment... (More)
This thesis applies the GARCH-MIDAS model to investigate the effects of macroeconomic variables, sentimental indicators, and financial variables on Swedish stock market volatility for the period January 2002 to December 2016. The GARCH-MIDAS framework allows the incorporation of data at different frequencies into the same model and decomposes volatility into two components. A short-term component and a long-term component of volatility. The findings show that some of the investigated variables affect stock market volatility. Among the investigated variables, the realized volatility is, in terms of variance ratios, considered the best determinant of volatility, followed by the level specification of the producer price index, unemployment and the term spread, and the volatility specification of the purchasing manager’s index, exchange rate, and the industrial confidence. (Less)
Popular Abstract
This thesis applies the GARCH-MIDAS model to investigate the effects of macroeconomic variables, sentimental indicators, and financial variables on Swedish stock market volatility for the period January 2002 to December 2016. The GARCH-MIDAS framework allows the incorporation of data at different frequencies into the same model and decomposes volatility into two components. A short-term component and a long-term component of volatility. The findings show that some of the investigated variables affect stock market volatility. Among the investigated variables, the realized volatility is, in terms of variance ratios, considered the best determinant of volatility, followed by the level specification of the producer price index, unemployment... (More)
This thesis applies the GARCH-MIDAS model to investigate the effects of macroeconomic variables, sentimental indicators, and financial variables on Swedish stock market volatility for the period January 2002 to December 2016. The GARCH-MIDAS framework allows the incorporation of data at different frequencies into the same model and decomposes volatility into two components. A short-term component and a long-term component of volatility. The findings show that some of the investigated variables affect stock market volatility. Among the investigated variables, the realized volatility is, in terms of variance ratios, considered the best determinant of volatility, followed by the level specification of the producer price index, unemployment and the term spread, and the volatility specification of the purchasing manager’s index, exchange rate, and the industrial confidence. (Less)
Please use this url to cite or link to this publication:
author
Kejlberg, Sebastian LU
supervisor
organization
course
NEKP03 20162
year
type
H2 - Master's Degree (Two Years)
subject
keywords
GARCH, MIDAS, stock market, volatility, macroeconomic, OMXSB, Sweden
language
English
id
8957965
date added to LUP
2018-09-24 13:59:04
date last changed
2018-09-24 13:59:04
@misc{8957965,
  abstract     = {{This thesis applies the GARCH-MIDAS model to investigate the effects of macroeconomic variables, sentimental indicators, and financial variables on Swedish stock market volatility for the period January 2002 to December 2016. The GARCH-MIDAS framework allows the incorporation of data at different frequencies into the same model and decomposes volatility into two components. A short-term component and a long-term component of volatility. The findings show that some of the investigated variables affect stock market volatility. Among the investigated variables, the realized volatility is, in terms of variance ratios, considered the best determinant of volatility, followed by the level specification of the producer price index, unemployment and the term spread, and the volatility specification of the purchasing manager’s index, exchange rate, and the industrial confidence.}},
  author       = {{Kejlberg, Sebastian}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Effects of Economic Variables on Swedish Stock Market Volatility A GARCH-MIDAS Approach}},
  year         = {{2018}},
}