Which popular predictor is more useful to forecast international stock markets during the coronavirus pandemic: VIX vs EPU?

Wang, Jiqian; Lu, Xinjie; He, Feng; Ma, Feng

doi:10.1016/j.irfa.2020.101596

Cited by 95 publications

(47 citation statements)

References 51 publications

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“…Thus, these papers put the fundamental agruments how the uncertainties are associated with the the stock market jumps. Concomitantly, Wang et al ( 2020 ) explained the efficiency of predictive power of both VIX and EPU on forecasting the equity markets during COVID-19. Interestingly, VIX contains the strongest predictive ability by using the different models.…”

Section: Brief Literature Review Regarding Covid-19 Impacts On Financmentioning

confidence: 99%

Preventing crash in stock market: The role of economic policy uncertainty during COVID-19

et al. 2021

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This paper investigates the impact of economic policy uncertainty (EPU) on the crash risk of US stock market during the COVID-19 pandemic. To this end, we use the GARCH-S (GARCH with skewness) model to estimate daily skewness as a proxy for the stock market crash risk. The empirical results show the significantly negative correlation between EPU and stock market crash risk, indicating the aggravation of EPU increase the crash risk. Moreover, the negative correlation gets stronger after the global COVID-19 outbreak, which shows the crash risk of the US stock market will be more affected by EPU during the epidemic.

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Section: Brief Literature Review Regarding Covid-19 Impacts On Financmentioning

confidence: 99%

Preventing crash in stock market: The role of economic policy uncertainty during COVID-19

et al. 2021

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“…Turning to the pandemic shock on stock market volatility, Wang et al. ( 2020 ) have applied the HAR-RV (Heterogeneous Autoregressive-Realized Variance) model to predict daily stock market volatility during the Covid outbreak period. They extended the HAR equation with two alternative daily US uncertainty proxies: (i) the VIX index, which is the implied volatility metric of S&P500 used as a financial uncertainty source, and (ii) the US Economic Policy Uncertainty.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Wang et al. ( 2020 ) investigated the US uncertainty spillovers on financial volatility across the different markets globally while the present paper focuses on the US uncertainty spillover effect alongside other US and global macro-factors on emerging stock market volatilities applying the sophisticated HEAVY framework for both returns and realized dispersion measures. Our macro-augmented specification with daily macro-proxies driving the volatility pattern during the last two decades with the 2008 turmoil and the pandemic period included, also advances the volatility modeling research which does not consider significant macro-determinants of the volatility process in the high-frequency domain.…”

Section: Literature Reviewmentioning

confidence: 99%

Emerging stock market volatility and economic fundamentals: the importance of US uncertainty spillovers, financial and health crises

2021

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This paper studies the US and global economic fundamentals that exacerbate emerging stock markets volatility and can be considered as systemic risk factors increasing financial stability vulnerabilities. We apply the bivariate HEAVY system of daily and intra-daily volatility equations enriched with powers, leverage, and macro-effects that improve its forecasting accuracy significantly. Our macro-augmented asymmetric power HEAVY model estimates the inflammatory effect of US uncertainty and infectious disease news impact on equities alongside global credit and commodity factors on emerging stock index realized volatility. Our study further demonstrates the power of the economic uncertainty channel, showing that higher US policy uncertainty levels increase the leverage effects and the impact from the common macro-financial proxies on emerging markets’ financial volatility. Lastly, we provide evidence on the crucial role of both financial and health crisis events (the 2008 global financial turmoil and the recent Covid-19 pandemic) in raising markets’ turbulence and amplifying the volatility macro-drivers impact, as well.

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“…The S&P 500 equity index has decreased almost 5%, and the Dow-Jones index crashed almost 3,000 points on March 11, 2020. This event was the greatest decline of the U.S. stock markets since Black Monday in 1987 (13,14).…”

Section: Introductionmentioning

confidence: 99%

Empirical Examination on the Drivers of the U.S. Equity Returns in the During the COVID-19 Crisis

Wang

Bai

Huang

2021

Front. Public Health

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This study investigates the drivers of the Standard & Poor's (S&P) 500 equity returns during the COVID-19 crisis era. The paper considers various determinants of the equity returns from December 31, 2019, to February 19, 2021. It is observed that the United States Dollar (USD) and the volatility indices (VIX) negatively affect the S&P 500 equity returns. However, the newspaper-based infectious disease “equity market volatility tracker” is positively associated with the stock market returns. These results are robust to consider both the ordinary least squares (OLS) and the least angle regression (LARS) estimators.

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Which popular predictor is more useful to forecast international stock markets during the coronavirus pandemic: VIX vs EPU?

Cited by 95 publications

References 51 publications

Preventing crash in stock market: The role of economic policy uncertainty during COVID-19

Preventing crash in stock market: The role of economic policy uncertainty during COVID-19

Emerging stock market volatility and economic fundamentals: the importance of US uncertainty spillovers, financial and health crises

Empirical Examination on the Drivers of the U.S. Equity Returns in the During the COVID-19 Crisis

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