Economic Cycle and Symmetric Volatility of Financial Market Returns: Study of Emerging Economies

Subject Areas : Journal of Investment Knowledge

Saeed Moradpour ¹ , Reza Tehrani ² , Seyed Mojtaba Mirlohi ³ , Ezatolah Abbasian ⁴

1 - Phd Student in Finance, International Campus, University of Tehran, Kish, Iran (corresponding auther)
2 - Professer management facullity, University of Tehran, Tehran, Iran
3 - Asistanat Professer Industerial and management facullity, industrial university of Shahrood, Shahrood, Iran
4 - Associated Professer economice facullity, Bu-Ali Sina University, Hamedan, Iran

Received: 2017-05-22 Accepted : 2017-10-03 Published : 2019-03-21

Keywords: Economic cycles, Stock Market Volatility, Garch model, Emerging markets,

Abstract :

In the present research, the main issue is the modeling of stock market volatility fluctuations in emerging markets. In the first step, by using Hadrik Prescott's filter and Garch model (1.1), for extraction of economic cycle, by using the GDP we are indicating business cycles of conteries, the desired economics of modeling are carried out and the results obtained using Regression has been implemented on the returns of sample markets in 24 countries. The study period was between 1992 and 2016. The results show the significance and ability of models presented in the modeling of stock market fluctuations, and the relationship between economic cycles and capital market returns has been confirmed in some countries.    

References:

*       باطنی، پورزمانی و رهنمای رودپشتی, ف. (1393). بررسی اثر نقدشوندگی بازار ثانویه بر قیمت عرضه اولیه بورس اوراق بهادار تهران. مدیریت دارایی و تأمین مالی, 1(1), 63-74.

*       سجادی، سیدحسین ، فرازمند و صوفی, ع. (1390). بررسی رابطه ی متغیّرهای کلان اقتصادی و شاخص بازده نقدی سهام در بورس اوراق بهادار تهران. پژوهشنامه اقتصاد کلان, 10(39), 123-150.

*       شکیبایی و شاه‌سنایی. (1391). بررسی همگرایی اقتصادی و همزمانی چرخه های تجاری در گروه شانگهای. پژوهشهای رشد و توسعه پایدار, 3(12), 89-106.

*       طیب‌نیا و قاسمی, ف. (1385). نقش تکانه های نفتی در چرخه های تجاری اقتصادی ایران. پژوهشنامه اقتصادی, 4(6), 49-80.

*       Afrin, S. (2017). The role of financial shocks in business cycles with a liability side financial friction. Economic Modelling, 64(Supplement C), 249-269. doi:https://doi.org/10.1016/j.econmod.2017.03.015

*       Arouri, M. E. H. (2011). Does crude oil move stock markets in Europe? A sector investigation. Economic Modelling, 28(4), 1716-1725.

*       Balli, F., & Balli, H. O. (2011). Sectoral equity returns in the Euro region: Is there any room for reducing portfolio risk? Journal of Economics and Business, 63(2), 89-106.

*       Berdot, J.-P., Goyeau, D., & Leonard, J. (2006). The dynamics of portfolio management: Exchange rate effects and multisector allocation. International Journal of Business, 11(2).

*       Bigio, S., & Schneider, A. (2017). Liquidity shocks, business cycles and asset prices. European Economic Review, 97, 108-130. doi:https://doi.org/10.1016/j.euroecorev.2017.05.004

*       Camacho, M., & Martinez-Martin, J. (2015). Monitoring the world business cycle. Economic Modelling, 51, 617-625.

*       Carstensen, K., & Salzmann, L. (2017). The G7 business cycle in a globalized world. Journal of International Money and Finance, 73, Part A, 134-161. doi:https://doi.org/10.1016/j.jimonfin.2017.02.002

*       Greenwood, J., Hercowitz, Z., & Krusell, P. (2000). The role of investment-specific technological change in the business cycle. European Economic Review, 44(1), 91-115.

*       Halling, M., Yu, J., & Zechner, J. (2016). Leverage dynamics over the business cycle. Journal of Financial Economics, 122(1), 21-41. doi:https://doi.org/10.1016/j.jfineco.2016.07.001

*       He, Q., Liu, F., Qian, Z., & Tai Leung Chong, T. (2017). Housing prices and business cycle in China: A DSGE analysis. International Review of Economics & Finance. doi:https://doi.org/10.1016/j.iref.2017.01.012

*       Hingley, P., & Park, W. G. (2017). Do business cycles affect patenting? Evidence from European Patent Office filings. Technological Forecasting and Social Change, 116, 76-86. doi:https://doi.org/10.1016/j.techfore.2016.11.003

*       Hofmann, B., & Hohmeyer, K. (2016). The effect of the business cycle at college graduation on fertility. Economics of Education Review, 55, 88-102. doi:https://doi.org/10.1016/j.econedurev.2016.09.004

*       Jang, B.-G., Rhee, Y., & Yoon, J. H. (2016). Business cycle and credit risk modeling with jump risks. Journal of Empirical Finance, 39, Part A, 15-36. doi:https://doi.org/10.1016/j.jempfin.2016.08.001

*       Jin, Q. (2005). Business cycle, accounting behavior and earnings management.

*       Kiani, K. M. (2016). On business cycle fluctuations in USA macroeconomic time series. Economic Modelling, 53, 179-186.

*       Kollmann, R. (2016). International business cycles and risk sharing with uncertainty shocks and recursive preferences. Journal of Economic Dynamics and Control, 72, 115-124. doi:https://doi.org/10.1016/j.jedc.2016.03.005

*       Kydland, F. E., & Prescott, E. C. (1991). The econometrics of the general equilibrium approach to business cycles. The Scandinavian Journal of Economics, 161-178.

*       Lukmanova, E., & Tondl, G. (2017). Macroeconomic imbalances and business cycle synchronization. Why common economic governance is imperative for the Eurozone. Economic Modelling, 62, 130-144. doi:https://doi.org/10.1016/j.econmod.2017.01.004

*       McGrattan, E. R., Rogerson, R., & Wright, R. (1997). An equilibrium model of the business cycle with household production and fiscal policy. International Economic Review, 267-290.

*       Miles, W. (2016). The impact of the US on Latin American business cycles: A new approach. Economic Systems. doi:https://doi.org/10.1016/j.ecosys.2016.10.002

*       Mitchell, W. C., & Burns, A. F. (1938). Statistical indicators of cyclical revivals Statistical Indicators of Cyclical Revivals (pp. 1-12): NBER.

*       Nandha, M., & Faff, R. (2008). Does oil move equity prices? A global view. Energy Economics, 30(3), 986-997. doi:http://dx.doi.org/10.1016/j.eneco.2007.09.003

*       Schreiber, S., & Soldatenkova, N. (2015). Anticipating business-cycle turning points in real time using density forecasts from a VAR. Journal of Macroeconomics.

*       Sheldon, T. L. (2017). Asymmetric effects of the business cycle on carbon dioxide emissions. Energy Economics, 61, 289-297. doi:https://doi.org/10.1016/j.eneco.2016.11.025

*       Taylor, J. G. (1998). Investment timing and the business cycle (Vol. 40): John Wiley & Sons.

*       Wei, K. J., & Wong, K. M. (1992). Tests of inflation and industry portfolio stock returns. Journal of Economics and Business, 44(1), 77-94.

*       Yépez, C. A. (2017). Financial intermediation, consumption dynamics, and business cycles. Economic Modelling, 60, 231-243. doi:https://doi.org/10.1016/j.econmod.2016.09.026

*       Yıldırım-Karaman, S. (2017). Uncertainty in financial markets and business cycles. Economic Modelling. doi:https://doi.org/10.1016/j.econmod.2017.08.001

*       Zarnowitz, V. (1999). Theory and history behind business cycles: are the 1990s the onset of a golden age? Retrieved from