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Stock Market Uncertainty and Business Optimism in Major Emerging Economies

Author

Listed:
  • Nahiyan Faisal Azad

    (University of Wisconsin - Parkside)

  • Apostolos Serletis

    (University of Calgary)

Abstract

With the rapid growth of emerging economies in recent years and their significant contribution to world economic activity, how leading emerging economies such as Brazil, China, Greece, India, Russia, South Africa, and Turkey respond to domestic stock market shocks and stock market uncertainty is a question of utmost importance. We estimate the interdependence between investor sentiment and real stock prices, in the context of a structural vector autoregressive model modified to accommodate GARCH-in-Mean errors and a structural VAR where we identify the model using a combination of short-run and long-run restrictions after addressing the simultaneity problem between business optimism and stock prices. We provide empirical evidence that higher uncertainty about the future path of real stock prices in general has a negative effect on business confidence in emerging economies.

Suggested Citation

  • Nahiyan Faisal Azad & Apostolos Serletis, 2025. "Stock Market Uncertainty and Business Optimism in Major Emerging Economies," Open Economies Review, Springer, vol. 36(3), pages 873-900, July.
    • Handle: RePEc:kap:openec:v:36:y:2025:i:3:d:10.1007_s11079-024-09781-6
    DOI: 10.1007/s11079-024-09781-6
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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