Dynamic Industry Uncertainty Networks and the Business Cycle

Baruník, Jozef; Bevilacqua, Mattia; Faff, Robert W.

doi:10.2139/ssrn.3768370

Cited by 2 publications

(1 citation statement)

References 76 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The index is designed to track real business conditions at a daily frequency. It is constructed from the (seasonally adjusted) high-and low-frequency blending of 50 economic indicators.1 The daily data for the ADS index are obtained from the Federal Reserve of Philadelphia.2 A number of recent studies have used this index, includingUluceviz and Yilmaz (2021) andBarunik et al (2021).For uncertainty proxies, we use the Baker et al (2016) economic policy uncertainty (EPU) index and the Caldara and Iacoviello (2022) geopolitical risk (GPR) index. Both of these are available from the Federal Reserve Bank of St. Louis.The EPU index is derived from textual data in the form of news articles and media coverage of policy-related economic uncertainty.3 The GPR index is derived from automated textsearch results that count the occurrence of words related to geopolitical tensions in leading international newspapers.4 Insert Fig.1 abouthere Figure1plots the daily evolution of each variable over the sample period.…”

mentioning

confidence: 99%

Did real economic uncertainty drive risk connectedness in the oil–stock nexus during the COVID-19 outbreak? A partial wavelet coherence analysis

Al-Shboul

Maghyereh

2023

Preprint

View full text Add to dashboard Cite

The paper extends the literature by examining whether real economic policy (the business condition risk (ADS)) can derive the risk connectedness in the oil–stock nexus during the COVID-19 outbreak using the multivariate wavelet coherency (MWC) and partial wavelet coherency (PWC) methods. The wavelet methods allow to isolate the effect of different global risk indices (such as the US economic uncertainty index (EPU), the crude oil volatility index (OVX), and the geopolitical risk index (GPR)) on the level of risk connectedness. Based on the daily data for the period January 2018–December 2020, we find that very strong impact of real economic uncertainty indices on risk connectedness. This impact is time-varying and frequency-sensitive, and it exhibits event-specific patterns. We find stronger MWC and PWC between real economy uncertainty indices and risk connectedness at lower frequencies. However, during the coronavirus disease 2019 (COVID-19) crisis, higher coherencies are found at higher frequencies; conditional to the effect of each global risk factor (EPU, GRP, and OVX), we also find higher PWC between oil and equity volatilities at lower frequencies. This study provides useful guidance to regulators and portfolio risk diversifiers. JEL Classifications : G12; G15; G18 ; G01; F3; E44

show abstract

mentioning

confidence: 99%

Did real economic uncertainty drive risk connectedness in the oil–stock nexus during the COVID-19 outbreak? A partial wavelet coherence analysis

Al-Shboul

Maghyereh

2023

Preprint

View full text Add to dashboard Cite

show abstract

Did real economic uncertainty drive risk connectedness in the oil–stock nexus during the COVID-19 outbreak? A partial wavelet coherence analysis

Al-Shboul,

Maghyereh

2023

Economic Structures

View full text Add to dashboard Cite

This study explores the impact of real economic policy (business condition risk) on the oil–stock nexus risk connectedness during the COVID-19 pandemic. It uses multivariate wavelet coherency and partial wavelet coherency methods to isolate the effects of global risk indices, such as the US economic uncertainty index, the crude oil volatility index, and the geopolitical risk index, on risk connectedness. The study is based on daily data from January 2018 to December 2020 and finds a strong impact of real economic uncertainty indices on risk connectedness, with time-varying and frequency-sensitive patterns. The results also show that during the COVID-19 crisis, higher coherencies between oil and equity volatilities exist at lower frequencies. This research provides useful insights for regulators and portfolio diversifiers.

show abstract

Dynamic Industry Uncertainty Networks and the Business Cycle

Cited by 2 publications

References 76 publications

Did real economic uncertainty drive risk connectedness in the oil–stock nexus during the COVID-19 outbreak? A partial wavelet coherence analysis

Did real economic uncertainty drive risk connectedness in the oil–stock nexus during the COVID-19 outbreak? A partial wavelet coherence analysis

Did real economic uncertainty drive risk connectedness in the oil–stock nexus during the COVID-19 outbreak? A partial wavelet coherence analysis

Contact Info

Product

Resources

About