Forecasting Volatilities of Asian Markets Using U.S. Macroeconomic Variables

Kae-Yih Tzeng

Emerging Markets Finance and Trade, 2023, vol. 59, issue 3, 676-687

Abstract: Extensive in-sample and out-of-sample studies are conducted to investigate the predictive power of 20 US macroeconomic variables for 11 Asian stock market volatility using data from July 1997 to April 2019 and rigorous econometric exercises. The in-sample reports VIX, commercial paper-Treasury bill spreads, Purchasing Managers’ Index in the manufacturing sector, and divided-price ratio as powerful predictors. The out-of-sample reports VIX, divided-price ratio and Purchasing Managers’ Index in the manufacturing sector as powerful predictors. We find that combination forecasting methods enhance predictability of Asian stock market volatility when aggregating information in all macroeconomic variables.

Date: 2023
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DOI: 10.1080/1540496X.2022.2119808

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