Predictability of the Realised Volatility of International Stock Markets Amid Uncertainty Related to Infectious Diseases

Sisa Shiba (), Juncal Cunado Author-jcunado@unav.es and Rangan Gupta
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Sisa Shiba: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
Juncal Cunado Author-jcunado@unav.es: Department of Economics, University of Navarra, 31009 Pamplona, Spain

No 202181, Working Papers from University of Pretoria, Department of Economics

Abstract: In the context of the great turmoil in the financial markets caused by the COVID-19 pandemic, the predictability of daily infectious diseases-related uncertainty (EMVID) for international stock markets volatilities is examined using heterogeneous autoregressive realised variance (HAR-RV) models. A recursive estimation approach in the short, medium and long-run out-of-sample predictability is considered and the main findings show that the EMVID index plays a significant role in forecasting the volatility of international stock markets. Furthermore, the results suggest that the most vulnerable stock markets to EMVID are those in Singapore, Portugal and The Netherlands. The implications of these results for investors and portfolio managers amid high levels of uncertainty resulting from infectious diseases are discussed.

Keywords: Uncertainty; Infectious Diseases; COVID-19; International Stock Markets; Realised Volatility; Forecasting (search for similar items in EconPapers)
JEL-codes: C22 D80 G17 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2021-11
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Journal Article: Predictability of the Realised Volatility of International Stock Markets Amid Uncertainty Related to Infectious Diseases (2022)
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