Information shocks, market returns and volatility: a comparative analysis of developed equity markets in Asia

Hassan Zada (), Huma Maqsood (), Shakeel Ahmed () and Muhammad Zeb Khan ()
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Hassan Zada: SZABIST
Huma Maqsood: SZABIST
Shakeel Ahmed: SZABIST
Muhammad Zeb Khan: HITEC University

SN Business & Economics, 2023, vol. 3, issue 1, 1-22

Abstract: Abstract This research explores the function of information shocks in equity returns and integrated volatility of emerging Asian markets using Swap Variance (SwV) approach on the period of 20 years (Feb 2001–Feb 2020). It compares average monthly returns and volatility of shock periods with non-shock periods after separating negative and positive shocks. Findings reveal frequent occurrence of information shocks in all Asian developed equity markets with positive shocks than that of negative shocks. Moreover, highly volatile Asian developed markets earn higher returns during shocks periods, while markets with higher volatility and lower continuous returns are adversely affected during shocks periods. The ratio of total realized volatility and the average ratio of shocks volatility establish that shocks account for a considerable amount of volatility, and integrated volatility is higher during negative shocks phases. The study has implications for all stakeholders of financial markets for rational investment decisions.

Keywords: Shock identification; Swap variance; Realized volatility; Bipower variation; Tripower variation (search for similar items in EconPapers)
JEL-codes: G11 G15 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s43546-022-00417-w

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