Less is more? New evidence from stock market volatility predictability
Fei Lu,
Feng Ma and
Qiang Guo
International Review of Financial Analysis, 2023, vol. 89, issue C
Abstract:
The complex nature of stock market volatility has motivated researchers to apply a variety of predictors to obtain reliable predictive information for precise forecasting. This study seeks to examine the effectiveness of the novel Global Financial Uncertainty (GFU) indices, comprising of only five sub-indices, in predicting stock market volatility using the widely used mixed-data sampling (MIDAS) model. The results demonstrate the remarkable and stable predictive power of GFU, even during crises and global financial uncertainty shocks. Specifically, the financial uncertainty index from Europe plays a significant role in our analysis. Importantly, we find that the GFU index outperforms a large number of other indicators in stock volatility forecasting. The statistical and economic significance of the predictive power of GFU is remarkable. Our study provides significant insights for market participants and policymakers that highlight the need to prioritize global financial uncertainty.
Keywords: Global financial uncertainty; Stock market; Volatility forecasting; Uncertainty shocks; MIDAS (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521923003356
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:89:y:2023:i:c:s1057521923003356
DOI: 10.1016/j.irfa.2023.102819
Access Statistics for this article
International Review of Financial Analysis is currently edited by B.M. Lucey
More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().