Influence of COVID-induced fear on sovereign bond yield
07 Jun 2021-pp 1-18
TL;DR: In this paper, the influence of fear generated by the coronavirus on bond markets was analyzed, and the relationship between the sentiment of fear and bond markets and the performance of financial markets was explored.
Abstract: There is limited literature exploring the relationship between the sentiment of fear and bond markets. This study analyzes the influence of fear generated by the coronavirus on bond markets, partic...
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TL;DR: In this article , a time-frequency based wavelet approach comprising wavelet coherence and phase difference was used to measure pandemic uncertainty and its effect on stock market activity, while controlling the effect of the Financial and Economic Attitudes Revealed by Search (FEARS) sentiment index.
10 citations
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TL;DR: In this paper, a first look at the efficiency of forex markets during the initial period of the ongoing coronavirus disease 2019 (COVID-19), which has disrupted the global financial markets was provided.
Abstract: We employ multifractal detrended fluctuation analysis (MF-DFA) to provide a first look at the efficiency of forex markets during the initial period of the ongoing coronavirus disease 2019 (COVID-19), which has disrupted the global financial markets. We use high-frequency (5-min interval) data of six major currencies traded in forex markets during the period October 1, 2019 to 31 March 31, 2020. Before applying MF-DFA, we examine the inner dynamics of multifractality through seasonal and trend decompositions using loess. Overall, the results confirm the presence of multifractality in forex markets, which demonstrates, in particular, (i) a decline in the efficiency of forex markets during the COVID-19 outbreak and (ii) heterogeneous effects on the strength of multifractality of exchange rate returns under investigation. The largest effect is observed for the Australian dollar, which shows the highest (lowest) efficiency before (during) the COVID-19 pandemic, assessed in terms of low (high) multifractality. The Canadian dollar and the Swiss Franc exhibit the highest efficiency during the COVID-19 outbreak. Our findings may help policymakers shape a comprehensive response to improve forex market efficiency during such a black swan event.
5 citations
TL;DR: In this paper , the best safe-haven for stock investors in the American market since the COVID-19 pandemic outbreak was found, and quantile coherency between S&P 500 and each asset and the respective conditional correlation was analyzed.
1 citations
TL;DR: In this paper , the authors explored the volatility dynamics and measures the persistence of shocks to the sovereign bond yield volatility in India from 1 January 2016, to 18 May 2022, using a family of GARCH models.
Abstract: Abstract Does Indian sovereign yield volatility reflect economic fundamentals, or whether it is a self-generated force flowing through markets with little connection to such fundamentals? To answer the question, this research explores the volatility dynamics and measures the persistence of shocks to the sovereign bond yield volatility in India from 1 January 2016, to 18 May 2022, using a family of GARCH models. The empirical results indicate the high volatility persistence across the maturity spectrum in the sample period. However, upon decomposing the markets into bull and bear phases, our results support the existence of weak volatility persistence and rapid mean reversion in the bear market. This shows that the economic response policies implemented by the government during the pandemic, including fiscal measures, have a restraining effect on sovereign yield volatility. For a positive γ, the results suggest the possibility of a “leverage effect” that is markedly different from that frequently seen in stock markets. Results further indicate that the fluctuations in Indian sovereign yields cannot be dissociated from inflation and money market volatility. Our findings herein provide valuable information and implications for policymakers and financial investors worldwide.
TL;DR: In this paper , the ability of a global fear index (GFI) based on the COVID-19 pandemic and government policy responses as a measure of uncertainty in predicting eight Indian rupee-based exchange rate return series was examined.
Abstract: The paper aims to examine the ability of a global fear index (GFI) based on the COVID-19 pandemic and government policy responses as a measure of uncertainty in predicting eight Indian rupee-based exchange rate return series: the Australian dollar, the Canadian dollar, the Swiss franc, the US dollar, the euro, the British pound sterling, the New Zealand dollar, and the Japanese yen. The predictability of the daily Indian rupee-based exchange rate return series is tested using the recently developed wild bootstrap likelihood ratio test of Kim and Shamsuddin for the period 2 October 2020 to 8 March 2021. Both symmetric and asymmetric tests revealed GFI as an insignificant determinant of the Indian rupee-based exchange rate return series. However, government policy responses are a significant determinant of the rupee-dollar exchange rate return series.
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TL;DR: In this article, the null hypothesis of no misspecification was used to show that an asymptotically efficient estimator must have zero covariance with its difference from a consistent but asymptonically inefficient estimator, and specification tests for a number of model specifications in econometrics.
Abstract: Using the result that under the null hypothesis of no misspecification an asymptotically efficient estimator must have zero asymptotic covariance with its difference from a consistent but asymptotically inefficient estimator, specification tests are devised for a number of model specifications in econometrics. Local power is calculated for small departures from the null hypothesis. An instrumental variable test as well as tests for a time series cross section model and the simultaneous equation model are presented. An empirical model provides evidence that unobserved individual factors are present which are not orthogonal to the included right-hand-side variable in a common econometric specification of an individual wage equation.
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TL;DR: The socio-economic effects of COVID-19 on individual aspects of the world economy are summarised to show the need for medical supplies has significantly increased and the food sector has seen a great demand due to panic-buying and stockpiling of food products.
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TL;DR: The potential consequence of policy interventions, such as the US’ decision to implement a zero-percent interest rate and unlimited quantitative easing (QE), and how these policies may introduce further uncertainties into global financial markets are analyzed.
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TL;DR: The Chicago Board Options Exchange9s Market Volatility Index (VIX) as discussed by the authors is called the "investor fear gauge" and is the most widely used index in the stock market.
Abstract: The Chicago Board Options Exchange9s Market Volatility Index (VIX) is called the “investor fear gauge.” To understand why, it is necessary to understand the index9s construction. To understand how VIX performs its role, it is necessary to examine its history and its relation to stock market returns. In this article, the author describes the construction of the volatility index and examines in movements over the past fourteen years.
988 citations
TL;DR: The findings indicate that both the daily growth in total confirmed cases and in total cases of death caused by COVID-19 have significant negative effects on stock returns across all companies.
895 citations