US share prices and real supply and demand shocks

Fraser, Patricia; Groenewold, Nicolaas

doi:10.1016/j.qref.2004.09.002

Cited by 12 publications

(5 citation statements)

References 32 publications

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“…This finding stands in contrast to other studies focusing on the US market, where a supply shock leads to permanently higher real stock prices (e.g. Rapach, 2001;Fraser and Groenewold, 2006). One plausible interpretation is that Japan's anaemic economic growth and financial weakness after the collapse of the stock market present a stark contrast to the fairly robust growth (and a rapidly appreciating stock market) in the US.…”

Section: Results From Svar Modelcontrasting

confidence: 93%

“…We use monthly time series for the study, instead of annual or quarterly data employed by the majority of earlier studies, which may suffer from considerable size distortion and loss of power (e.g. Rapach, 2001;Fraser and Groenewold, 2006). Using higher frequency data appears more suitable for the Japanese stock market which experienced sudden jumps and sharp corrections, as well as breaks and collapses in the past two decades.…”

Section: Datamentioning

confidence: 99%

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Macro shocks and the Japanese stock market

Huang

Guo

2008

Applied Financial Economics

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The article investigates to what extent various underlying macro (oil, supply, demand and portfolio) shocks impact the fluctuations of Japanese stock prices by developing a multivariate structural vector autoregression (SVAR) model. The results from a Markov regime-switching (MS) specification of the underlying shocks reveal that these shock-generating processes are characterized by nonlinearity with varied turning points and fit well with the actual historical events. Demand shocks, as opposed to supply shocks, are found to render pronounced influence on the stock market dynamics, indicating Japan's anaemic economic growth in the past decades has limited the role of supply shocks. Meanwhile, we find the importance of oil price shocks in driving the stock market as Japan is well synchronized in the world energy market.

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Section: Results From Svar Modelcontrasting

confidence: 93%

Section: Datamentioning

confidence: 99%

Macro shocks and the Japanese stock market

Huang

Guo

2008

Applied Financial Economics

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“…Following a positive supply shock, the relative stock differential declines in all countries under the estimation of the second identification scheme (Figure 2E). This finding is at odds with the empirical results of Fraser and Groenewold (2006). In contrast, under the agnostic identification scheme, the relative stock differential increases initially in most countries, particularly in Asian countries.…”

Section: Supply Shockscontrasting

confidence: 56%

A re-examination of the impacts of macroeconomic and financial shocks on real exchange rate fluctuation: evidence from G7 and Asian countries

Wong

2020

Applied Economics

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“…For relative stock index (REQ) variable, the model allows supply and exchange rate shock to have long-run impacts. Fraser, using quarterly data and an identification method based on structural VAR, proved that supply shocks make a greater contribution to changes in stock prices and cited them as the essential source of variation in the stock indices (Fraser & Nicolaas, 2006). Similarly, as discussed in the academic literature review, most empirical studies provide evidence of an impact of an exchange rate shock on equity prices in developing as well as in the developed countries.…”

Section: Identification Of Var Modelmentioning

confidence: 98%

Forex and financial markets dynamics: A case of China and ASEAN

Akram

Malik

Imtiaz

et al. 2020

Cogent Economics & Finance

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The paper aims to investigate the possible dual causality between exchange rates and stock indices of China and ASEAN using Structural Vector Auto-Regressive Model (SVAR). The paper has analysed the dynamic relationships between the Yuan and the Shanghai Composite Index and Shenzhen Stock Index in the context of China's third largest trading bloc, i.e., ASEAN, after the Asian Financial Crisis of 1997. The Asian Financial Crisis of 1997-98 had an adverse impact on stock indices and the currencies of ASEAN countries. It was also expected that a devaluation of the Yuan would follow soon, thus plummeting investors' confidence in the Chinese markets. Further research was needed to explore the complex relationship between financial and forex markets in the context of China and ASEAN. The focus of this paper is to explore such relationship with the focus on China. The results of the model confirm the dual causality between the two variables of interest in China. It concludes that a positive financial shock does have a small but significant impact upon the Yuan, whereas a positive exchange rate shock has a high and a significant impact upon the Shanghai and Shenzhen Composite Indices. The paper finds the effect of monetary and demand shocks upon the Yuan and stock market indices to be insignificant.

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US share prices and real supply and demand shocks

Abstract: We are grateful to Patrick Hendershott for comments on an earlier draft.

Cited by 12 publications

References 32 publications

Macro shocks and the Japanese stock market

Macro shocks and the Japanese stock market

A re-examination of the impacts of macroeconomic and financial shocks on real exchange rate fluctuation: evidence from G7 and Asian countries

Forex and financial markets dynamics: A case of China and ASEAN

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