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Monetary Policy Uncertainty and Volatility Jumps in Advanced Equity Markets

Author

Listed:
  • Elie Bouri

    (USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon)

  • Konstantinos Gkillas

    (Department of Business Administration , University of Patras, University Campus, Rio, P.O. Box 1391, 26500 Patras, Greece.)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

  • Clement Kyei

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa.)

Abstract

We analyze the role of monetary policy uncertainty in predicting volatility jumps in nine advanced equity markets. The standard linear Granger causality test detects weak evidence of monetary policy uncertainty causing volatility jumps. But given the strong evidence of nonlinearity between jumps and monetary policy uncertainty, we next use a nonparametric causality-in-quantiles test, since the linear model is misspecified. Using this data-driven robust approach we find strong evidence of the role of monetary policy uncertainty in predicting volatility jumps, especially towards the lower end of the conditional distribution.

Suggested Citation

  • Elie Bouri & Konstantinos Gkillas & Rangan Gupta & Clement Kyei, 2019. "Monetary Policy Uncertainty and Volatility Jumps in Advanced Equity Markets," Working Papers 201939, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201939
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    References listed on IDEAS

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    Cited by:

    1. Matthew W Clance & Riza Demirer & Rangan Gupta & Clement Kweku Kyei, 2020. "Predicting firm-level volatility in the United States: the role of monetary policy uncertainty," Economics and Business Letters, Oviedo University Press, vol. 9(3), pages 167-177.

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    More about this item

    Keywords

    Stock Market Volatility Jumps; Monetary Policy Uncertainty;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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