Supply Chain Constraints and the Predictability of the Conditional Distribution of International Stock Market Returns and Volatility

Elie Bouri (), Oguzhan Cepni, Rangan Gupta and Ruipeng Liu ()
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Elie Bouri: School of Business, Lebanese American University, Lebanon
Ruipeng Liu: Department of Finance, Deakin Business School, Deakin University, Melbourne, VIC 3125, Australia

No 202440, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper analyses the effect of supply constraints on international stock market volatility and while also considering their effect on stock returns. Using higher-order nonparametric causality-in-quantiles tests and daily data for China, France, Germany, Italy, Spain, the United Kingdom, the United States, and overall Europe, we find strong evidence of Granger causality flowing from supply constraints to the entire conditional distribution of stock returns and volatility. Notably, supply constraints positively predict stock volatility. This positive predictability remains robust when using alternative measures, including monthly realized variance and different metrics of supply constraints. Our findings have implications for investors and policymakers.

Keywords: Supply Constraints; Stock Markets Volatility; Higher-Order Nonparametric Causality-in-Quantiles Test (search for similar items in EconPapers)
JEL-codes: C21 C22 E23 G15 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2024-09
New Economics Papers: this item is included in nep-cna
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Journal Article: Supply chain constraints and the predictability of the conditional distribution of international stock market returns and volatility (2025)
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