Volatile Financial Conditions, Asset Prices, and Investment Decisions: Analysis of daily data of DJIA and S&P500, from January to April of 2022

Christopher Warburton and Jared Pemberton

Applied Econometrics and International Development, 2023, vol. 23, issue 1, 101-124

Abstract: This paper is a logical outgrowth of empirical work in a Securities Analysis and Portfolio Management course at Houghton University between the start of January 2022 and end of April 2022. Remarkably, the exposure of global financial markets to two unmistakable events (shocks), the COVID-19 pandemic and the Russo-Ukrainian war (February 24, 2022)—sources of systematic risk—coincided with our empirical inquiry. The dual shocks, which exacerbated negative investment prospects for multiple product and financial sectors, heightened the uncertainty of profitable returns from investments in financial markets. The performance of eight publicly traded companies in the US and composite indices—the Dow Jones Industrial Average (DJIA) and the S& P 500—were tracked on a daily basis from January 10, 2022 to April 29, 2022, generating a total of 77 observations. Using the superior performance of a moving average model and the Holt-Winters algorithm, we found that profitable investment prospects existed during the period of systematic risk. We conclude that technical analysis provided time sensitive information for leveraged financial investments during turbulent periods of systematic risk.

Keywords: Dollar Cost Averaging; Dow Jones Industrial Average; S& P 500; Forecasting; Fundamental Analysis; Option Pricing; Systematic Risk. (search for similar items in EconPapers)
JEL-codes: C53 G12 G13 N22 (search for similar items in EconPapers)
Date: 2023
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