Information shocks, market returns and volatility: a comparative analysis of developed equity markets in Asia

Abstract

This research explores the function of information shocks in equity returns and integrated volatility of emerging Asian markets using Swap Variance (SwV) approach on the period of 20 years (Feb 2001–Feb 2020). It compares average monthly returns and volatility of shock periods with non-shock periods after separating negative and positive shocks. Findings reveal frequent occurrence of information shocks in all Asian developed equity markets with positive shocks than that of negative shocks. Moreover, highly volatile Asian developed markets earn higher returns during shocks periods, while markets with higher volatility and lower continuous returns are adversely affected during shocks periods. The ratio of total realized volatility and the average ratio of shocks volatility establish that shocks account for a considerable amount of volatility, and integrated volatility is higher during negative shocks phases. The study has implications for all stakeholders of financial markets for rational investment decisions.

Does US monetary policy uncertainty affect returns of Asian Developed, emerging, and frontier equity markets? Empirical evidence by using the quantile-on-quantile approach

“…The findings of our study are in line with earlier studies like [ 36 , [46] , [47] , [48] , [49] ]. This study finds that across developed, emerging, and frontier nations in Asia, it becomes evident that unpredictable shocks in MPU exert a negative influence on stock returns in these countries.…”

“…The extent of this impact varies depending on the country under consideration, as MPU is treated as the independent variable. Moreover, lower levels of MPU tend to uplift stock returns to some degree, while an increase in uncertainty corresponds to an increase in stock returns [ 36 , 47 , 48 ]. These findings emphasize the substantial negative impact of US MPU on Asian stock markets, given the global reach of the US dollar.…”