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Market Volatility of the Three Most Powerful Military Countries during Their Intervention in the Syrian War

Author

Listed:
  • Viviane Naimy

    (Faculty of Business Administration and Economics, Notre Dame University—Louaize, Zouk Mikayel, Zouk Mosbeh 72, Lebanon)

  • José-María Montero

    (Department of Political Economy and Public Finance, Economic and Business Statistics, and Economic Policy, Faculty of Law and Social Sciences, University of Castilla-La Mancha, 45071 Toledo, Spain)

  • Rim El Khoury

    (Faculty of Business Administration and Economics, Notre Dame University—Louaize, Zouk Mikayel, Zouk Mosbeh 72, Lebanon)

  • Nisrine Maalouf

    (Financial Risk Management—Faculty of Business Administration and Economics, Notre Dame University—Louaize, Zouk Mikayel, Zouk Mosbeh 72, Lebanon)

Abstract

This paper analyzes the volatility dynamics in the financial markets of the (three) most powerful countries from a military perspective, namely, the U.S., Russia, and China, during the period 2015–2018 that corresponds to their intervention in the Syrian war. As far as we know, there is no literature studying this topic during such an important distress period, which has had very serious economic, social, and humanitarian consequences. The Generalized Autoregressive Conditional Heteroscedasticity (GARCH (1, 1)) model yielded the best volatility results for the in-sample period. The weighted historical simulation produced an accurate value at risk (VaR) for a period of one month at the three considered confidence levels. For the out-of-sample period, the Monte Carlo simulation method, based on student t-copula and peaks-over-threshold (POT) extreme value theory (EVT) under the Gaussian kernel and the generalized Pareto (GP) distribution, overstated the risk for the three countries. The comparison of the POT-EVT VaR of the three countries to a portfolio of stock indices pertaining to non-military countries, namely Finland, Sweden, and Ecuador, for the same out-of-sample period, revealed that the intervention in the Syrian war may be one of the pertinent reasons that significantly affected the volatility of the stock markets of the three most powerful military countries. This paper is of great interest for policy makers, central bank leaders, participants involved in these markets, and all practitioners given the economic and financial consequences derived from such dynamics.

Suggested Citation

  • Viviane Naimy & José-María Montero & Rim El Khoury & Nisrine Maalouf, 2020. "Market Volatility of the Three Most Powerful Military Countries during Their Intervention in the Syrian War," Mathematics, MDPI, vol. 8(5), pages 1-21, May.
    • Handle: RePEc:gam:jmathe:v:8:y:2020:i:5:p:834-:d:361026
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    References listed on IDEAS

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    Cited by:

    1. Piotr Fiszeder & Marta Ma³ecka, 2022. "Forecasting volatility during the outbreak of Russian invasion of Ukraine: application to commodities, stock indices, currencies, and cryptocurrencies," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 17(4), pages 939-967, December.

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