Towards an asymmetric long run equilibrium between stock market uncertainty and the yield spread. A threshold vector error correction approach

Evgenidis, Anastasios; Τσαγκανός, Αθανάσιος; Siriopoulos, Costas

doi:10.1016/j.ribaf.2016.08.002

Cited by 21 publications

(10 citation statements)

References 37 publications

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“…Both News Impact series as well as Volume series are significant regressors in the ARIMAX models. Our findings are also in line with findings from (Evgenidis et al 2017) who see a clear connection between stock market volatility and yield spreads. The movements in yields in Germany are hereby less affected; France exhibits a stronger Granger causality between VIX and the yield spread.…”

Section: Countries' Mean Bond Spreadssupporting

confidence: 93%

Macroeconomic News Sentiment: Enhanced Risk Assessment for Sovereign Bonds

Erlwein-Sayer¹

2018

Risks

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We enhance the modelling and risk assessment of sovereign bond spreads by taking into account quantitative information gained from macro-economic news sentiment. We investigate sovereign bonds spreads of five European countries and improve the prediction of spread changes by incorporating news sentiment from relevant entities and macro-economic topics. In particular, we create daily news sentiment series from sentiment scores as well as positive and negative news volume and investigate their effects on yield spreads and spread volatility. We conduct a correlation and rolling correlation analysis between sovereign bond spreads and accumulated sentiment series and analyse changing correlation patterns over time. Market regimes are detected through correlation series and the impact of news sentiment on sovereign bonds in different market circumstances is investigated. We find best-suited external variables for forecasts in an ARIMAX model set-up. Error measures for forecasts of spread changes and volatility proxies are improved when sentiment is considered. These findings are then utilised to monitor sovereign bonds from European countries and detect changing risks through time.

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Section: Countries' Mean Bond Spreadssupporting

confidence: 93%

Macroeconomic News Sentiment: Enhanced Risk Assessment for Sovereign Bonds

Erlwein-Sayer¹

2018

Risks

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“…A consistent T-ECM was also applied to investigate the non-linear adjusting process of the yield spread to its equilibrium value in response to changes in stock market volatility. The inter-relationships and the asymmetric co-movements between the yield spread, macroeconomic factors and the stock market volatility across five major world economies were studied ( Evgenidis et al, 2017 ).…”

Section: Literature Reviewmentioning

confidence: 99%

The recovery of global stock markets indices after impacts due to pandemics

David

Inacio

Machado

2021

Research in International Business and Finance

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“…With regard to temporal aggregation, Choi (1992) illustrates that in finite samples aggregating subinterval data can also result in substantial power losses. 2 Recent studies suggest that, during the last financial crisis, macro and financial time series have been described by significant nonlinearities Siriopoulos, 2015, andEvgenidis et al 2017). The tests considered in this paper are linear but recursive in nature.…”

Section: Introductionmentioning

confidence: 95%

Detecting periods of exuberance: A look at the role of aggregation with an application to house prices

2019

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The recently developed SADF and GSADF unit root tests of Phillips and Yu (2011) and Phillips et al. (2015a,b) have become popular in the literature for detecting exuberance in asset prices. In this paper, we examine through simulation experiments the effect of cross-sectional aggregation on the power properties of these tests. The simulation design considered is based on simulated data and actual housing data for both U.S. metropolitan areas and international housing markets and thus allows us to draw conclusions for different levels of aggregation. Our findings suggest that aggregation lowers the power of both the SADF and GSADF tests. The effect, however, is much larger for the SADF test. We also provide evidence that tests based on panel data techniques, namely the panel GSADF test recently proposed by Pavlidis et al. (2016), can perform substantially better than univariate tests applied to aggregated series. Furthermore, we also illustrate the date-stamping procedure under the univariate/panel GSADF procedure uncovering novel evidence on the role of interest rates and policy uncertainty as factors explaining episodes of widespread mildly explosive dynamics in housing markets.

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Towards an asymmetric long run equilibrium between stock market uncertainty and the yield spread. A threshold vector error correction approach

Cited by 21 publications

References 37 publications

Macroeconomic News Sentiment: Enhanced Risk Assessment for Sovereign Bonds

Macroeconomic News Sentiment: Enhanced Risk Assessment for Sovereign Bonds

The recovery of global stock markets indices after impacts due to pandemics

Detecting periods of exuberance: A look at the role of aggregation with an application to house prices

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