Financial Vulnerability and Volatility in Emerging Stock Markets: Evidence from GARCH-MIDAS Models
Riza Demirer (),
Rangan Gupta (),
He Li () and
Yu You ()
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He Li: School of International Economics and Politics, Liaoning University, Shenyang, Liaoning, China
No 202112, Working Papers from University of Pretoria, Department of Economics
This paper establishes a predictive relationship between financial vulnerability and volatility in emerging stock markets. Focusing on China and India and utilizing GARCH-MIDAS models, we show that incorporating financial vulnerability can substantially improve the forecasting power of standard macroeconomic fundamentals (output growth, inflation and monetary policy interest rate) for stock market volatility. The findings have significant implications for investors to improve the accuracy of volatility forecasts.
Keywords: Stock Market Volatility; Financial Vulnerability; GARCH-MIDAS; Emerging Markets (search for similar items in EconPapers)
JEL-codes: C32 C53 G15 G17 (search for similar items in EconPapers)
Pages: 10 pages
New Economics Papers: this item is included in nep-cwa, nep-ets, nep-fmk, nep-for, nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202112
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