Discovering the drivers of stock market volatility in a data-rich world

Dohyun Chun, Hoon Cho and Doojin Ryu

Journal of International Financial Markets, Institutions and Money, 2023, vol. 82, issue C

Abstract: This study comprehensively examines the economic and financial drivers of volatility changes in terms of a cross-country perspective. We review a wide range of studies related to financial volatility forecasting and collect a diverse set of prediction variables. By analyzing them within a unified framework, we find that only a small number of variables contain significant predictive information. Most of all, we discover that among various global market indicators, Chinese stock market movements significantly predict U.S. stock market volatility. Further analyses provide evidence of the effect of Chinese stock market movements on the U.S. stock market.

Keywords: Asset allocation; Cross-market studies; Global financial markets; Heterogeneous autoregressive model; LASSO; Volatility forecasting; C53; C55; G17 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:82:y:2023:i:c:s1042443122001561

DOI: 10.1016/j.intfin.2022.101684

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