Can economic policy uncertainty predict financial stress? A MIDAS approach

Abstract

In this article, by using the mixed-frequency data sampling (MIDAS) model, we investigate whether economic policy uncertainty (EPU) can predict financial stress. Our estimation results show that EPU has a significant positive effect on the future financial stress, indicating that EPU is a determinant of financial stress. Moreover, the out-of-sample prediction results show that the MIDAS model performs better than the traditional time-series OLS model.

Analyzing the frequency dynamics of volatility spillovers across precious and industrial metal markets

“…With deregulation, securitization, globalization, and rapid development of information technology, the different financial markets are increasingly integrated. Price volatility in one market, due to the irrational herd effect and incomplete information, usually has spillover effects on another market (King & Wadhwani, 1990; Orlowski & Sywak, 2019; Wen et al, 2018; Xiong et al, 2020; Y. Xu et al, 2017; X. Yang et al, 2019, 2021). Strohsal and Weber (2015) regard volatility spillovers as a proxy for the spread of valuable information among linked markets.…”