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Know that volatility is a part of the investment experience, however, it can still become difficult to
make rational investment decisions when the markets are fluctuating. Interestingly, before crisis,
Japanese stock market is effecting the volatility spillover, but post crisis, US stock market bears
greater impact on the volatility of three small south Asian markets. If you refuse cookies we will
remove all set cookies in our domain. In this paper, previous studies featuring a generalized
autoregressive conditional heteroskedastic (GARCH) family-based model stock market return and
volatility have also been reviewed. GARCH models are used to model for forecast volatility of one
time series. Unmanaged index returns do not reflect fees, expenses, or sales charges. When the VIX
is low, it usually indicates that investors believe the market will head higher. The keywords that were
too broad or likely to be recognized in literature-related keywords with other research areas are
specified below. Editors select a small number of articles recently published in the journal that they
believe will be particularly. Editors select a small number of articles recently published in the journal
that they believe will be particularly. If we consider QLIKE, the EGARCH with normal distribution
has the best predictability, however, if we consider MSE, the APARCH with normal distribution is
the best predictor model. Howeve r, in sub-sample 2, only 38 out of 60 coefficients (63.33%) are
negative, and only 15 (25%) are significant. Therefore, the knowledge of theoretical and literature
significance of volatility are needed to measure the volatility of stock index returns. There are only
three exceptions: Austria, Belgium and Luxemburg. The raw data were offered by the authors from
the literature together with explanations of the data and key fundamental concepts. In con- trast, a
semi-parametric specification of the conditional variance allows flexible functional forms, and
therefore can lead potentially to more reliable estimation and in- ference. The test statistic is the
mean absolute error (MAE) which is a measurement of the co-cumulative forecasting error of the
model. In our analysis the MAE is calculated from the monthly sub-samples of observations. The
pat- terns documented in Table 5 do not change at all, and the im- pact of the put options on the
weekend effect is trivial. Also we notice a negative relationship in Finland and Ireland and a positive
relationship in the other two mark ets. Overall, their results support the presence of positive volatility
spillover from other markets to the Indian market. In Long memory in economics (pp. 289-309).
Springer, Berlin, Heidelberg. Precisely, EMH implies that markets are efficient and hence, stock
prices and stock returns are fully reflected in the market trends. This questions still needs more
empirical evidence to decide about their usefulness. It is a great challenge for investors to get a pure
understanding of volatility. Spillover effects in presence of strong asymmetric volatility have serious
implications for the policy makers. This method was continual until no additional appropriate cross-
references could be recognized. We show some evidence that a sig- nificant negative relationship
between stock market re- turns and market volatility prevails in most major stock markets. Robust
Check Different Sub Periods Up until now we set the early sub-sample as the period before Jan 1 st,
1995, and the recent sub-sample as the period on or after Jan 1 st, 1995. Note that blocking some
types of cookies may impact your experience on our websites and the services we are able to offer.
Section 4 presents the literature analysis of knowledge acquired regarding volatility and risk
management in cryptocurrencies. Our goal is to understand each of our client’s needs and then try to
create a plan to address those needs. In this way, cryptocurrency volatility decreases when firms
withdraw crypto payment options and increases when firms introduce these crypto payment options.
International Journal of Scientific and Research Publications, 3(10), 1-17. Changes will take effect
once you reload the page. During periods of high uncertainty, the market trading rules becomes less
heterogeneous as speculators observe other speculators on trading rules. The results indicate that VaR
and ES better predictions are made by the two-regime GRACH. As described by modern portfolio
theory (MPT), volatility creates risk that is associated with the degree of dispersion of returns around
the average. LASSO was chosen as the feature selection technique, and as the feature extraction
technique PCA is used. The authors conclude that the MS-COGARCH outperforms the single-regime
COGARCH. This results in high volatility since the prices are adjusted strongly by the market maker
who faces a less balanced excess demand. There are many factors that affect price movements in the
stock market. Industry and sector factors can also cause increased stock market volatility. Shin
(2005) studied the stock return and volatility in the 14 emerging markets using weekly stock price
data. The line on the graph in Figure 1 reflectsvolatility for each rolling 21 day period starting in 2nd
January 1981 and moving with each dayup to the present, i.e., 11th March 2019. Similarly, second
graph shown as Fig. 2 reflects volatility for each rolling 12 month period starting in January 1981
and moving with each month up to the present, i.e., March 2019. These graphs help in understanding
phenomenon of stock market volatility in several ways. The results reveal that oscillatory long run
autocorrelations are better filters to model the log daily return range instead of the standard long run
autocorrelations. Moreover, the models GARCH-M and AGARCH-M have a similar forecasting
ability with AGARCH-M being slightly ahead. We further divide our total sample period into two
sub-pe- riods—before Jan 1, 1995 and after Jan 1, 1995—to see whe- ther the negative coefficients
happen in some specific sub-pe- riod. Conversely, the degree of volatility weakens; volatility
feedback can be simply described as unpredictable stock volatility that will inevitably lead to higher
risk in the future. Find support for a specific problem in the support section of our website. The
Technological Forecasting and Social Change is the most cited journal that contributed to our
research field in 2021. 3.4. Authors In Table 4 we present the most cited authors in cryptocurrencies’
volatility and risk research field. The Autoregressive Conditional Heteroscedasticity or ARCH9 and
Generalised Autoregressive Conditional Heteroscedasticity or GARCH10 models are specifically
meant to deal with these issues related to stock returns volatility. The most widely used GARCH
form is GARCH (1, 1) and this has some extensions. Their research tells us that higher volatility
corresponds to a higher probability of a declining market. Shows the top 10 articles by number of
citations (771 citations and 32 publications). All articles published by MDPI are made immediately
available worldwide under an open access license. No special. These research articles were evaluated
for the quality of proof they produced and were further examined. Through a systematic literature
review approach, we can provide a better understanding of the existing knowledge on cryptocurrency
investment as well as facilitate future research by identifying literature gaps. This implies that the
risk of the firm increases, as such, increasing the volatility of the firm. A study of the volatility of
financial asset returns is also one of the core issues in modern financial research and this volatility is
often described and measured by the variance of the rate of return.
At last, it is worth mentioning that even though there has been plenty of debate about the complexity
of volatility of the stock returns, the GARCH model have evolved as a better tool for estimation of
time-varying conditional volatility of stock returns across the world. Therefore, they opted to analyze
cryptocurrencies’ volatility using a novel model. It determined that a lot of methodologies like
GARCH models, Johansen models, VECM, Impulse response functions, and Granger causality tests
are practiced broadly in examining stock market volatility and return analysis across countries as well
as among sectors with in a country. GARCH model incorporates further adds yesterday’s conditional
volatility to ARCH for estimation of current conditional volatility of a stock’s returns. Subscribe to
receive issue release notifications and newsletters from MDPI journals. The line on the graph in
Figure 1 reflectsvolatility for each rolling 21 day period starting in 2nd January 1981 and moving
with each dayup to the present, i.e., 11th March 2019. Similarly, second graph shown as Fig. 2
reflects volatility for each rolling 12 month period starting in January 1981 and moving with each
month up to the present, i.e., March 2019. These graphs help in understanding phenomenon of stock
market volatility in several ways. ISPRS International Journal of Geo-Information (IJGI). The rest of
the paper is arranged as follows: Section 2 ex- plains the data source and sample characteristics,
Section 3 shows the empirical results, Section 4 is the robust check, and Section 5 concludes. The
MSE and the QLIKE loss functions with the RV, are also considered, as volatility proxy. However,
their contributions vary across the time period between 2019 and 2021. In this section we test
whether short sales explain the week- end effect worldwide. At the same time, financial market
volatility has also a direct impact on macroeconomic and financial stability. Journal of Experimental
and Theoretical Analyses (JETA). Volatility is one of the most important characteristics of financial
markets. While return is considered as a reward of investing and the risk is the amount of potential.
Therefore, we are able to obtain a MAE figure for each month. However, bidirectional and
unidirectional spillover effects have been established across other Asian markets. Through this
methodology, and the use of bibliometric coupling of VOSviewer software, a cluster related to
volatility and risk management in the cryptocurrency market naturally emerges. For other
cryptocurrencies, the results are not clear. International Journal of Turbomachinery, Propulsion and
Power (IJTPP). The market maker facing a balanced excess demand eventually adjusts prices less
forcefully and as such volatility remains low. Journal of Pharmaceutical and BioTech Industry
(JPBI). In an ideal situation, if this be the case, the entire information content that backs the market
should smoothen the process of adjustment in the market. PMON it is an interaction term of a put
option dummy (1 if the market allows the practice of put options and 0 otherwise) and the
MONDUM it 7. Table 3 explains the review of GARCH and its variations models. During periods of
high uncertainty, the market trading rules becomes less heterogeneous as speculators observe other
speculators on trading rules. The results reveal that oscillatory long run autocorrelations are better
filters to model the log daily return range instead of the standard long run autocorrelations. Short
sellers are now getting more comfortable at managing their positions worldwide, rather than staying
within one single market. Following the indications of Ding et al. ( 2014 ); van Eck and Waltman (
2017 ); Galvao et al. ( 2019 ); Rialti et al. ( 2019 ); Bartolacci et al. ( 2020 ) and Sadeghi Moghadam
et al. ( 2021 ), we have selected VOSviewer 1.6.17 for our bibliometric analysis. Goudarzi and
Ramanarayanan (2011) in their study show evidence about volatility clustering and
leptokurtosis11associated with stock returns in the Indian stock market using conditional return
volatility of BSE500 index returns.
Further, at different levels of statistical significance, volatility spillover effects are also observed
from US to Sri Lanka and Japan to Pakistan and US to India. Our findings are highly consistent with
the explanation that the weakened impact of short sales on the weekend effect is due to cross-market
he- dges. Note that from the first issue of 2016, this journal uses article numbers instead of page
numbers. First, empirical research on the heteroscedastic character of stock returns volatility is
examined. This paper noticed that all the studies in this review used an investigational research
method. Based on the semi-parametric specification, we find a statistically significant negative
relationship of the risk-return tradeoff in most markets. Discussion and Conclusions The weekend
effect is a research field full of discussions and controversies. Therefore, research on the volatility of
financial markets has always been the focus of financial economists and financial practitioners. Our
samples include papers published in journals ranked across different fields in ABS ranked journals.
Christie (1982) argues that with a decline in price, the value of market equity reduces compared to
the market value of debt, as such, increasing the financial leverage of the firm. This paper conducts a
literature review of stock returns and volatility analysis based on generalized autoregressive
conditional heteroskedastic (GARCH) family models. This questions still needs more empirical
evidence to decide about their usefulness. This study will be beneficial for researchers, scholars,
stock exchanges, regulators, governments, investors, and other concerned parties. Shows the top 10
articles by number of citations (771 citations and 32 publications). The most recognizable use of
multivariate GARCH models is the analysis of the relations between the volatilities and co-
volatilities of several markets. Journal of Theoretical and Applied Electronic Commerce Research
(JTAER). Additionally, short-term variants of the technical trading rules have better predictive ability
than long-term variants. Journal of Manufacturing and Materials Processing (JMMP). This is
reflected in the value of the parameter product 1 i. Asian Economic and Financial Review, 7(2), 175-
187. Volatility refers to the degree of dispersion of random variables. Further, the two stock markets
are more sensitive to falling rather than rising trends of each other, implying that there is a mutual
tendency between these markets to crash due to a retreat in the counterpart market. Wang et al.
(2005) found evidence of significant return spillover from the US and Japan to India, Pakistan, and
Sri Lanka. However, forecasting perfect market volatility is difficult work and despite the availability
of various models and techniques, not all of them work equally for all stock markets. Different
literature studies based on generalized autoregressive conditional heteroskedastic (GARCH) and its
variations models. The model confidence set (MCS) method was used to evaluate the best model.
However, unlike gold, the case of Bitcoin shows a positive coupling effect, which in situations of
shocks and market decline, means that Bitcoin also declines ( Klein et al. 2018 ). Regarding
spillovers between cryptocurrencies and other markets as well as amongst the cryptocurrency market,
evidence shows returns and shocks spillovers between the Bitcoin market and stock markets. For
instance, a straddle trading strategy that implements Bitcoins’ long position volatility by the purchase
of a Bitcoin put option and a Bitcoin call option with the same expiration and strike ( Siu 2021 ).
Region and country economic factors, such as tax and interest rate policy, contribute to the
directional change of the market and thus volatility. Similarly, they carry out as the basis for future
research and theory work. Abstract must show clear indication of stock market volatility and return
studies through GARCH model robustness.
Appearing up top Klein, Tony and Walther, Thomas, as the most cited two authors in the dataset,
with 226 citations each. The estimation procedure is as follows: Under 0:0 H. International Journal of
Turbomachinery, Propulsion and Power (IJTPP). Paper should be a substantial original Article that
involves several techniques or approaches, provides an outlook for. Keywords: Weekend Effect;
Short Sales; Market Anomaly; Stock Market Volatility Introduction We provide empirical evidence,
from an international per- spective, to document the long st anding weekend effect and its relation
with short sales. Ranked in second place is Research in International Business and Finance with 145
citations, followed by Finance Research Letters with 135 citations. Most of the previous empirical
studies attempted to study the trade-off between expected. These re- sults are independent of
various potential biases. LASSO was chosen as the feature selection technique, and as the feature
extraction technique PCA is used. There are currently two main explanations in the academic world
for the relationship between these two: The leverage effect and the volatility feedback hypothesis.
All articles published by MDPI are made immediately available worldwide under an open access
license. No special. Note that from the first issue of 2016, this journal uses article numbers instead of
page numbers. In con- trast, a semi-parametric specification of the conditional variance allows
flexible functional forms, and therefore can lead potentially to more reliable estimation and in-
ference. MONDUM it is a dummy variable which takes the value of 1 if date t is a Monday and 0
otherwise. MONDUM it is a dummy variable which takes the value of 1 if date t is a Mon- day and
0 otherwise 5. The daily data was considered from the period January 1999 to January 2014
GARCH model Result revealed absence of any spillover effect of volatility across Indian and
Chinese stock markets. Hence, in presence of a high degree of asymmetry in news impact, it would
be difficult to reverse high volatility in times of sharp market retreats by infusing positive policy
news into the market. Due to the oscillatory behavior of cryptocurrencies, the authors also
incorporated the Gegenbauer long-run autocorrelation filter. This volatility increases the uncertainty
and risk of the stock market and is detrimental to the normal operation of the stock market. Christie
(1982) argues that with a decline in price, the value of market equity reduces compared to the market
value of debt, as such, increasing the financial leverage of the firm. Note that from the first issue of
2016, this journal uses article numbers instead of page numbers. However, the general their
perception about risk of a stock is influenced by market risk. You are free to opt out any time or opt
in for other cookies to get a better experience. This is especially true for those investors who monitor
their portfolios daily and can be tempted to pull out of the market and wait on the sidelines until it
seems safe to dive back in. Past performance is no guarantee of future results. Asymmetric GARCH
models, for instance and like, EGARCH, GJR GARCH, and TGARCH, etc. Section 4 presents the
literature analysis of knowledge acquired regarding volatility and risk management in
cryptocurrencies. The asymmetric volatility transmission mechanism operates from the US stock
market, i.e. to the Indian and Sri Lankan stock markets signifying that negative innovations in US
equity prices increase volatility in considerably more than positive innovations in India and Sri Lanka.
Further, empirical research in this particular area in the Indian context also lacks extensive research
using high frequency intra-day stock price data. The sign and significance of the parameter defines
the relationship betwee n stock market returns and conditional variance.
It is for this reason that researchers and financial analysts face such a complexity in market returns
and volatilities forecasting. Several studies apply a Markov-switching regime model such as Maciel (
2021 ) that compares the performance of prediction on MS-GARCH against traditional single-regime
GARCH methods for volatility forecasts. These results are consistent with the existing li- terature,
which has found that the weekend effect has been get- ting weaker recently. In the second group,
“model” was considered forecast models proposed by authors and other models for assessment.
Based on these arguments, Chen and Singal (2003) believe that short sellers tend to close their
positions before the weekend, and to reopen them on Mondays. Past performance is no guarantee of
future returns. This pattern indicates that, after 1995, the actions of short sellers cannot explain the
weekend effect. Dependence between markets increases during volatile periods. Discussion and
Conclusions The weekend effect is a research field full of discussions and controversies. They also
found evidence of impact of Japanese volatility on the Asian markets which itself is influenced by
the volatility from US and European markets. To solve the issue, a number of asymmetric GARCH
models including EGARCH, TGARCH, GJR GARCH and others have been developed over the last
few decades. At first stage, a systematic literature search is managed. Past performance is no
guarantee of future results. Figure 6 evidences, regarding normalized citations, that Pham Thu, Ana
Julia, and Pedro Henrique were the most cited authors in the year 2018, Julien, Nidhaleddine, and
Gerrit in 2020, and in 2021 Bushra, Muhammad, and Abbas are the most cited authors. 3.5.
Institutions Table 5 presents the analysis of the institutions that contributed the most to our research
field. This is when markets experience low volatility as they trend higher. First, empirical research on
the heteroscedastic character of stock returns volatility is examined. The GJR-GARCH named after
the econometricians Glosten et al. (1993) who introduced it, also deals with the problems of the
conventional GARCH in terms of modelling of asymmetric impacts of news on stock return
volatility. We use cookies on our website to ensure you get the best experience. ME 5 Table 1.
Results of the mean of the mean absolute forecasting errors of the four models. Note that blocking
some types of cookies may impact your experience on our websites and the services we are able to
offer. In this way, cryptocurrency volatility decreases when firms withdraw crypto payment options
and increases when firms introduce these crypto payment options. In order to test this explanation,
we separate the developed markets from the developing markets, and test the relationship between
short sales and the weekend effect in each case. Further, the study observed that international trade
and stock market volatility is negatively related in the sense that volatility reduces the volume of
trade and increases current account and capital account deficits. The MSE and the QLIKE loss
functions with the RV, are also considered, as volatility proxy. All authors have read and agreed to
the published version of the manuscript. Also we notice a negative relationship in Finland and
Ireland and a positive relationship in the other two mark ets. In other words, volatility appears to
arise in bunches. However, the ARCH (1) model forecasts seem to be stable, whereas the IGARCH
(1,2) model forecasts vary. Tropical Medicine and Infectious Disease (TropicalMed). Stock Market
Volatility and Return Analysis: A Systematic Literature Review.
In the subsample after 1995, the coefficients of CMON it for developed markets are now positive,
indicating that, in the recent decade or so, short sellers’ actions cannot explain the weekend effect.
Finally, volatility is important for the markets as it signals about their health, what is not desirable is
erratic behaviour of volatility taking an extreme form. Bose (2007) in respect of both intra and inter-
day futures and spot index returns argues that bad news at any given time pushes up volatility in the
next period by about three times as much as a good news of similar magnitude. The outcomes, in this
research, delivered future magnitudes to research experts for further work on the return and volatility
of stock market. Additionally, short-term variants of the technical trading rules have better predictive
ability than long-term variants. The method was revised a few days before the submission. CMON it
is the interaction term of a short sale dummy (1 if the market allows short sales and 0 oth- erwise)
and the MONDUM it. As investors get interested in a stock, trading volume, volatility, and prices
rise, but stocks that are already volatile and very liquid actually have the worst returns. In case 2 0 ?
? there are leverage effects while when 2 0. Here are four facts that can help investors understand
market corrections. The study estimates and evaluates seven different measures of volatility. For that,
we searched the WoS database from 2009 to 2021, filtered by 2021 ABS journals list. The volatility
of stocks has generally gone down over time. In asymmetric effect, the GJR-GARCH model
performed better and produced a higher predictable conditional variance during the period of high
volatility. In this section we test whether short sales explain the week- end effect worldwide. Our
motivation to employ a systematic literature review in this study is twofold: First, this paper is
motivated by the necessity of consolidation and a deeper understanding of the growing academic
literature on cryptocurrency’s volatility and risk management. The results indicate that the stacking
assemble methodology with LASSO outperforms the base models, and therefore it can be reached
better volatility forecasts than in those hybrid GARCH models often used in the literature. The
author argues that returns of the index follow leptokurtic distribution and their volatility exhibits
clustering. The results reveal through the log-likelihood values that the ST-GARCH provides the best
fit for Bitcoin, Ripple, and Litecoin. A time series that exhibits clusters or persistence is believed to
have strong predictive strength. Furthermore, the authors highlight that it is crucial to incorporate
exogenous variables into the TV-MS-GARCH model. However, whether such a relationship is
positive or negative has been controversial. After entering the interaction term, the coefficient of
MONDUM it in model (2) changes to ? 0.039%, less negative than in regression (1), mean- ing that
short sales do explain a large part of the weekend effect. Since then, there have been 37 corrections
(of at least 10%). Our empirical results strongly support Chen and Singal’s (2003) fin- dings that the
weekend effects are partly caused by the actions of short sellers’ position adjustments. Our research
indicates that the models that consider the Markov-switching regime seem to be more consensual
among the authors, and that the best machine learning technique performances are hybrid models
that consider the support vector machines (SVM). If you refuse cookies we will remove all set
cookies in our domain. Demetrescu (2007) states that market participants individually often perceive
risk of a stock given by volatility, differently. The estimation procedure is as follows: Under 0:0 H.
Further, at different levels of statistical significance, volatility spillover effects are also observed
from US to Sri Lanka and Japan to Pakistan and US to India.