Economics at your fingertips  

Volatility jumps: The role of geopolitical risks

Konstantinos Gkillas (Gillas) (), Rangan Gupta and Mark Wohar ()

Finance Research Letters, 2018, vol. 27, issue C, 247-258

Abstract: In this paper we analyse the role of a news-based index of geopolitical risks (GPRs), in predicting volatility jumps in the Dow Jones Industrial Average (DJIA) over the monthly period of 1899:01 to 2017:12, with the jumps having been computed based on daily data over the same period. Standard linear Granger causality test failed to detect any evidence of GPRs causing volatility jumps. But given strong evidence of nonlinearity and structural breaks between jumps and GPRs, we next used a nonparametric causality-in-quantiles test, since the linear model is misspecified. Using this data-driven robust approach we were able to detect overwhelming evidence of GPRs predicting volatility jumps of the DJIA over its entire conditional distribution. In addition, a cross-quantilogram analysis shows that what matters most for increases in volatility jumps are relatively higher GPRs than lower values of the same.

Keywords: Stock market volatility jumps; Geopolitical risks (search for similar items in EconPapers)
JEL-codes: C22 G10 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Volatility Jumps: The Role of Geopolitical Risks (2018)
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:

DOI: 10.1016/

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2023-10-08
Handle: RePEc:eee:finlet:v:27:y:2018:i:c:p:247-258