Sovereign bond markets and financial volatility dynamics: Panel-GARCH evidence for six euro area countries

Mean reversion in international markets: evidence from G.A.R.C.H. and half-life volatility models

“…The results of the study also demonstrate that there is a direct relation between stock returns and volatilities of the emerging and developed stock markets. These results are also consistent with previous research studies (Balsara et al, 2007;Kim et al, 2001;Lal, Mubeen, Hussain, & Zubair, 2016;Ribeiro et al, 2017;Slim et al, 2017;Trypsteen, 2017). Since the results indicate the mean reversion process in all the 12 emerging and developed markets, the returns of these markets revert back to their original past mean values after the certain time periods.…”

“…Similarly, Kuttu (2017) suggested that the existence of mean reversion process explains the different behaviours of the stock market. Ribeiro et al (2017), Ahmad et al (2016), and Kim, Morley, and Nelson (2001) also studied the behaviours of stocks and volatility, and they have also concluded the direct relationship between stock returns and the volatility. Arefin and Ahkam (2017), Chen et al (2012), and Balsara, Chen, and Zheng (2007) concluded that the investors should use the constrained trading strategy to get maximum profit because of the mean reversion process.…”

“…The theory of mean reversion demonstrates that after touching a certain extreme point, the equity prices return back to their mean prices (Arefin & Ahkam, 2017;Chi, Dong, & Wong, 2016;Lubnau & Todorova, 2015;Ribeiro, Cermeño, & Curto, 2017). The phenomenon is known as the mean reversion if the equity price has a tendency to come back its original long-term average price after some certain time period (Chaves & Viswanathan, 2016;Huang, 2017;Huggins & Schaller, 2013;Trypsteen, 2017).…”

“…According to previous research studies, the mean reversion process can be segregated into long-term and short-term mean reverting processes. If the return of a stock back into its mean value occurs within a one-month time period then it is known as short-term mean reversion process (Chi et al, 2016;Hart et al, 2015;Ribeiro et al, 2017). The flow of research studies regarding the short-term mean reversion has also been increased due to the access of information on a daily basis regarding the investments.…”

Tracking the relationship between euro area equities and sovereign bonds

“…To this end, it analyses cross-correlations both within each country and across countries, while also probing asymmetric features and causal relationships. In this vein, the present study devotes particular attention to the signals of fragmentation in the EMU financial markets, which is a topic that has been attracting special interest since the beginning of the European sovereign debt crisis (see, e.g., Gödl and Kleinert, 2016;Ehrmann and Fratzscher, 2017;Ribeiro et al, 2017). Secondly, given that agents have different investment horizons, the assessment of equity and debt instrument co-movements is originally made for different time scales.…”