Forecasting Sector-Level Stock Market Volatility: The Role of World Uncertainty Index

Miao Yu

Finance Research Letters, 2023, vol. 58, issue PC

Abstract: This study investigates the predictive ability of the World Uncertainty Index (WUI) on forecasting sector-level stock market volatility in the Shanghai Stock Exchange. The out-of-sample results demonstrate that the WUI improves volatility predictions, particularly in the materials, industrials, and health care sectors. Further analysis reveals the WUI's stronger predictive capability in high volatility states. The findings highlight the value of the WUI as a tool for anticipating and managing risk in specific sectors of the stock market.

Keywords: World Uncertainty Index; Stock market volatility; High and low volatility regimes (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pc:s1544612323009406

DOI: 10.1016/j.frl.2023.104568

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