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Exploring the distribution of security index prices during periods of distress: Evidence from International stock markets

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  • Samuel Tabot Enow

    (Research Associate, The IIE VEGA School)

Abstract

Stock return modeling is essential for active investors and market players. Value and risk analysis benefit from these simulations. Despite extensive study on stock price modeling, little is understood about how internal and external shocks affect stock market returns. Therefore, this study sought to fill this gap. A sample of five international financial markets from December 1, 2007, to June 30, 2009 and January 1, 2020 to December 31, 2021, the 2007-2008 financial crisis and most recent COVID-19 pandemic, were tested using a Cramer-von Mises and Watson test. Research showed that internal market volatility is more damaging than external shocks. During financial instability driven by external shocks, portfolio managers should expect two to three standard deviations of volatility. However, financial system shocks should cause a greater range of volatility. The authors believe this is the first study to predict stock market returns in reaction to regulatory announcements from market shocks. Key Words:Stock price distribution, Cramer-von Mises, Watson Test, Price modelling, Stock markets

Suggested Citation

  • Samuel Tabot Enow, 2023. "Exploring the distribution of security index prices during periods of distress: Evidence from International stock markets," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 12(6), pages 189-196, September.
    • Handle: RePEc:rbs:ijbrss:v:12:y:2023:i:6:p:189-196
    DOI: 10.20525/ijrbs.v12i6.2670
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    References listed on IDEAS

    as
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