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Macroeconomic Volatility and Stock Market Volatility, Worldwide

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  • Francis X. Diebold
  • Kamil Yilmaz

Abstract

Notwithstanding its impressive contributions to empirical financial economics, there remains a significant gap in the volatility literature, namely its relative neglect of the connection between macroeconomic fundamentals and asset return volatility. We progress by analyzing a broad international cross section of stock markets covering approximately forty countries. We find a clear link between macroeconomic fundamentals and stock market volatilities, with volatile fundamentals translating into volatile stock markets.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14269.

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Date of creation: Aug 2008
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Handle: RePEc:nbr:nberwo:14269

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Cited by:
  1. Costas Azariadis & Leo Kaas, 2010. "Capital Misallocation and Aggregate Factor Productivity," Working Paper Series, The Rimini Centre for Economic Analysis 39_10, The Rimini Centre for Economic Analysis.
  2. Morel, Christophe & Michel, Thierry & Michel, Laurent, 2010. "A Volatility-Driven Asset Allocation (VDAA)," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/5954, Paris Dauphine University.
  3. Torben G. Andersen & Tim Bollerslev & Peter F. Christoffersen & Francis X. Diebold, 2011. "Financial Risk Measurement for Financial Risk Management," CREATES Research Papers 2011-37, School of Economics and Management, University of Aarhus.
  4. Charlotte Christiansen & Maik Schmeling & Andreas Schrimpf, 2012. "A Comprehensive Look at Financial Volatility Prediction by Economic Variables," BIS Working Papers 374, Bank for International Settlements.
  5. Becker, Christoph & Schmidt, Wolfgang M., 2013. "Stressing correlations and volatilities — A consistent modeling approach," Journal of Empirical Finance, Elsevier, Elsevier, vol. 21(C), pages 174-194.
  6. Roel Beetsma & Massimo Giuliodori, 2011. "The Changing Macroeconomic Response to Stock Market Volatility Shocks," CESifo Working Paper Series 3652, CESifo Group Munich.
  7. Taylor, Nick, 2014. "The rise and fall of technical trading rule success," Journal of Banking & Finance, Elsevier, Elsevier, vol. 40(C), pages 286-302.
  8. Andrew Stuart Duncan & Alain Kabundi, 2011. "Global Financial Crises and Time-varying Volatility Comovement in World Equity Markets," Working Papers 253, Economic Research Southern Africa.
  9. Yin Hong, 2011. "Positive feedback trading, institutional investors and securities price fluctuation," China Finance Review International, Emerald Group Publishing, Emerald Group Publishing, vol. 1(2), pages 120-132, April.
  10. Karunanayake, Indika & Valadkhani, Abbas & O’Brien, Martin, 2012. "GDP Growth and the Interdependency of Volatility Spillovers," MPRA Paper 50398, University Library of Munich, Germany.

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