Volatility Jumps: The Role of Geopolitical Risks
Konstantinos Gkillas (Gillas) (),
Rangan Gupta () and
Mark Wohar ()
No 201805, Working Papers from University of Pretoria, Department of Economics
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 fail to detect any evidence of GPRs causing volatility jumps. But given strong evidence of nonlinearity and structural breaks between jumps and GPRs, we next employ a nonparametric causality-in-quantiles test, because the linear model is misspecified. Using this data-driven robust approach we were able to detect overwhelming evidence of GPRs predicting volatility jumps in the DJIA over its entire conditional distribution.
Keywords: Stock Market Volatility Jumps; Geopolitical Risks (search for similar items in EconPapers)
JEL-codes: C22 G10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201805
Access Statistics for this paper
More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().