Macroeconomic and financial market volatilities: an empirical evidence of factor model

Wei-Choun Yu ()

Economics Bulletin, 2008, vol. 3, issue 33, 1-18

Abstract: In this paper, we provide two empirical findings. First, exploring 140 monthly macroeconomic and financial variables and applying the principal components method, we find 12 static factors and 8 dynamic factors from 1959 to 2005 in the US. Second, we find the real factor and interest rate factor have been less volatile since the mid 1980s. The price factor and foreign exchange factor, in contrast, became more volatile in the late 1990s. The rest of the factors show no obvious pattern. We find that the real economy and financial market fluctuations are not closely related because they are driven by different factors.

Keywords: static; factor (search for similar items in EconPapers)
JEL-codes: C3 E3 (search for similar items in EconPapers)
Date: 2008-06-03
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