Title: Navigating the Challenges of Dissertation Writing on Stock Market Volatility
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In addition, empirical research is conducted to test whether a momentum strategy can be implemented to successfully beat the market. Currently, China is lack of fund management experts with rich theoretical knowledge and practical experience so that there are still some improper investments. Volatility is more dependent on mass hysteria fear and greed than on underlying economic or financial events. For example, a stock with a beta value of 1.1 has historically moved 110% for every 100% move in the benchmark, based on price level. On the other hand, the development of open-ended fund in China is not such long, and it lacks of sufficient development experiences and established laws and regulations. By the end of February, the number of open- ended funds in our country reached 1145, with 2.913797 trillion fund units and 2.740115 trillion of net assets. Results show that both before and after the release of open-ended funds, sum of two coefficients in bull market is larger than that in bear market. Note that this can happen without the underlying stock price moving or time passing in short, none of the option pricing factors moving. Download Free PDF View PDF See Full PDF Download PDF Loading Preview Sorry, preview is currently unavailable. Master’s Thesis, North China Electric Power University, Beijing. Stock Market. Place where stocks and bonds are regularly bought and sold. The standard deviations given for Cases A, B and C were 0, 1 and 10 respectively. When the price is spread apart, you have a relatively large standard deviation. Therefore under these difficulties of recognising stock market volatility in real time the true complexity of asking what the reaction of monetary authorities should be becomes clear. Popular presentations See more popular or the latest prezis. However, GARCH model supposes that the conditional mean of financial series remains unchanged. In the area of stock market volatility spillover effect, most of the studies have confirmed uni-directional spillover effect from the developed markets to the developing markets. The empirical controversy still exists in the literature on the volatility properties, like, persistence, heteroscedasticity, asymmetric effect and riskreturns frameworks. If variance response is symmetrical, which means volatility of yield does have same reaction no matter the news is good or bad. The overall persistence of stock market volatility is highest for Japan (0.931) and lowest for China (0.824).Using high-frequency intraday data, Jon Wongswan finds a large and significant association between developed-economy macroeconomic announcements and emerging-economy equity volatility and trading volume at short time horizons. 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. Factors causing such a situation include external factors, as well as internal factors. Volatility is used as an important element in portfolio management, risk management and pricing of financial securities. Compared with full Sample A, full sample B is obviously small, indicating that the effects of information about the stock market volatility on stock market volatility of current period are weakened. It means that the impact of external shocks on conditional variance will decay exponentially, the conditional variance after shocks will gradually return to its mean value. The article also analyses the existence of cointegration and dynamic relationship between the two indices during the pre-crisis, crisis and post-crisis periods, and in the last five years, using the Johansen Cointegration analysis and the Vector Auto Regression (VAR) Model. In the paper “Factors That Affect Emerging Stock Markets” the author tries to measure the extent up to which oil influences the growth of the stock market in emerging economies. When the prices are tightly bunched together, the standard deviation is small. Mukherjee and Mishra (2010) investigate into both contemporaneous and the lagged (with a lag of 1 day) intraday as well as overnight information spillover between 12 stock exchanges chosen from Asian region representing both developed and emerging markets of these regions. Industry and sector factors can also cause increased stock market volatility.
EMH sees volatility in returns as a response of the. First, Asian countries' microeconomic components were regressed on consumer confidence to identify the impact of microeconomics risk factors on the sentiment of investors. Therefore, transaction of buyers could lead to bigger fluctuation of stock price in bull market. Mean value introduces a variable in the equation, used to measure the degree of investment risk. This is when markets experience low volatility as they trend higher. Most of the researchers have confirmed the asymmetric impact of news on the conditional volatility. The instances of weak economic relation between conditional volatility and expected returns points about the missing risk factors that need to be pinned down while modelling of any risk-returns relationships. High or mounting volatility often corresponds to plunging markets; low or falling volatility corresponds to good markets. Maybe the influence of stock market policy effect leads to this during this period. Therefore, a stable market is very important for the long-term development of open-ended fund. Similarly, the VIX signaled the beginning of a recovery on March 9, 2022. The free movement of capital across global stock market has exposed them to the challenge of external spillover effects which are often beyond the intervention of local policy mechanism. The study observes that volatility as a whole in the sample companies is changing over time. After having the regression equation, we can directly select the ARCH effect in the Eviews 7 software for testing, and test results are shown in Table 3. First of all, we come to the understanding that volatility itself is volatile; i.e., it cycles erratically over time. The rest of the study is summarised as: the second segment takes. The author has stated that significant autocorrelation function of absolute returns over several lags decaying slowly to zero is the typical manifestation of the volatility clustering phenomenon Affected by “3 27 T- bonds futures event” in 1995, Chinese stock market became the object of State support This has also been referred to as, “the leverage effect” in the finance literature. In other words, the greater the chance of a lower-than-expected return, the riskier the investment. Thus when there is a perception of high market risk, the realized volatility will also be high. Check out this article to learn more or contact your system administrator. The movement of this wave demonstrates changing trader expectations of the future stock market volatility. Put differently, bad news slightly reduces the volatility during the pre-1990 period, while it increases the volatility substantially for the post-1990 period indicating a reversal of the well-known asymmetric effect of volatility. This dummy variable takes the value 1 for all quarters between 2007 Q3 and 2009 Q4. We used GARCH model and introduced sentiment in the mean framework. ARCH family models can be used to study on the volatility of China's stock market. Karmakar (2007) examined the risk-return trade-off of the daily stock index returns in the Indian stock market using GARCH-M (2,1) modeland found a positive but statistically insignificant relation between the conditional variance and the expected returns. Peng (2017) using Bi-GARCH model found that returns on both TAIEX and NIKKEI were substantially influenced by their lagged period returns. Although, it picked up again in 2012, the decline trend still called attention of relevant authorities.
When the market is in decline, individual investors increase redemption of fund, and fund managers have to sell more stocks from its portfolio in order to meet their liquidity needs. Cont (2007) while using a simple agent-based model has explained the phenomenon of volatility clustering through the activity of market participants on the basis of news arrival process. We select sample data a total of 1207 data from January 2, 1997 to December 31, 2001. In other words, the market is already starting to move at the same time that the level of implied volatility increases. This tends to cause the stock markets to decline and experience higher volatility. A number of studies have illustrated that stock returns may be predictable through implementing a momentum trading strategy, which contradicts the whole concept of the Efficient Market Hypothesis. 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. The theoretical and empirical analysis on the influence of open-ended funds on stock market volatility shows that stock market volatility is aggravated after open-ended funds enter into stock market. Using seven market-related implicit indicators a sentiment index has been constructed with the help of principal component analysis. Then the really good news came to us, Chinese stock market entered into a period of great development. Since the fundamental price of a stock is not verifiable then the nature of deviation of actual prices remains unverifiable as well (Shiller, 1989; Salge, 1997). Bubbles, i.e., increase of prices steadily above fundamentals can be identified ex-post. In the current situation, its been particularly frustrating for politicians and those who run economies to see that the stock markets did recover but the labor markets, with a much stickier structure, have not. It implies that there is a negative correlation between stock returns and volatility and the correlation is more significant in case of negative returns. South East European Journal of Economics and Business, 9(1), 7-15. Theirresultsshow presence of volatility clusteringinthe the Indianstockmarket. Discuss the factors influencing the volatility of agricultural commodity prices and the mechanisms available for governments and businesses to manage these price movements. The study finds that own volatility spillover is higher than cross-market spillover. During periods of high uncertainty, the market trading rules becomes less heterogeneous as speculators observe other speculators on trading rules. By increasing the volatility assumption fed into the model: The level of volatility that must be fed in so that the model outputs an observed market price is known as the implied volatility. Indeed, the VIX is often referred to as the “fear gauge.” VIX levels above 20 are viewed as reflecting an increased likelihood of a market drop. Individual investors often lack expertise and experience in investment, and their investment philosophy is not mature enough. We used GARCH model and introduced sentiment in the mean framework. Effect of news and other global events on crude oil supply and its prices. JFK assassinated. OPEC I. Asian Crisis. Afghanistan. Cuban missile crisis. Gulf War I. OPEC II. Compared with the United States and other developed countries, fund industry in China is very small in size for the quantity of funds and the net assets. The impact of bad news on stock market volatility is less than the impact of good news. Here, we assume that the random disturbance term submits to the normal distribution. The study observes that volatility as a whole in the sample companies is changing over time. MSc Student: Valentin STANESCU Supervisor: Professor Moisa ALTAR. These findings lead to the understanding that evidence on asymmetric effect in stock market volatility is still paradoxical in nature and hence calls for a thorough revisit.
The results show that there is a significant connection between investor sentiment and stock return volatility which shows that beha-vioural finance can significantly explain the behaviour of stock returns on the Johannesburg Stock Exchange. Then the analysis has been done by employing ordinary least squares methods, vector autoregression, Granger causality and EGARCH-M models. This implies that the market participants are generally risk averse and as such respond more to bad news. As such, the forecasting ability of volatility of stock returns by GARCH model has been widely debated in the empirical literature. When the bad news appears (external shocks), we expect to see increase of the yield volatility. In addition, when the stock market falls, fund managers tend to be panic and overreact to market information. Then the really good news came to us, Chinese stock market entered into a period of great development. 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. All these three models are known as symmetric models. Meanwhile, it is bigger than the absolute value of lever coefficient of full sample B, which indicates that impact of good news on has more effects on stock market volatility. Master’s Degree Thesis, Northeast University of Finance, Dalian. As it can be seen from Figure 6, significant deterministic trend doesn’t exist in yield rate data, so we chose the ADF test mode with intercept terms but without trend items. Download Free PDF View PDF See Full PDF Download PDF Loading Preview Sorry, preview is currently unavailable. When the market is in decline, individual investors increase redemption of fund, and fund managers have to sell more stocks from its portfolio in order to meet their liquidity needs. So that obvious ARCH effects exist in daily yield rate of Shanghai composite index. We select a total of 2665 sample data from January 4, 2002, to December 31, 2012. This questions still needs more empirical evidence to decide about their usefulness. This result is consistent with the sequential information arrival models of Copeland (1976) and Jennings, Starks and Fellingham (1981). Karmakar (2005) found using daily return data of 50 individual stocks of the Nifty that only eight out of fifty companies exhibited significant leverage effect and as such needed an asymmetric GARCH model, such as EGARCH to capture their unique nature of volatility. If you own a company's stock, then you are a owner, or shareholder, of the company. This paper discusses how the movements in stock prices affect determination of monetary policy. Compared with the United States and other developed countries, fund industry in China is very small in size for the quantity of funds and the net assets. Stock Market. Place where stocks and bonds are regularly bought and sold. Some studies on emerging markets, including BRICS16markets have established presence of spillover effects from these markets to the markets of the lesser developing economies. This has also been referred to as, “the leverage effect” in the finance literature It may be that the volume depends on other factors like the speed of information flow from Clark’s model The front of the volatility wave contains the same data used to calculate the CBOE VIX index. 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. However, bidirectional and unidirectional spillover effects have been established across other Asian markets. Using seven market-related implicit indicators a sentiment index has been constructed with the help of principal component analysis.
As rates increase, therefore, so too does the trend in price, increasing the intrinsic value expected at expiration and making a call more valuable. High or mounting volatility often corresponds to plunging markets; low or falling volatility corresponds to good markets. The leveraged effect of stock market volatility increases. Similarly, the VIX signaled the beginning of a recovery on March 9, 2022. When evaluating the network on the last 200 observations these internal mechanisms showed that the network performed well on data not presented to it in the training stages. In addition, the lack of fund managers with high quality and strong management capacity hinders the development of open-ended funds to some degree. Important Projects Topics in Finance Sorry for the inconvenience So that fund management activities won’t damage the interests of the fund investors for their own interests. However, during periods of low volatility in the stock market, the trading rules adopted by speculators are relatively more heterogeneous, since speculators trade independent of each other. Shin (2005) studied the stock return and volatility in the 14 emerging markets using weekly stock price data. However, the argument placed is that the phenomenon is more pronounced for indices than for individual stocks. Thus, volatility occurs due to the rational expectations of the. The stock market is a medium for the trading of stocks. Its performance has been found superior to all other models as per RMSE13, Theil-U14 and three asymmetric loss functions. The findings of Asian countries strongly support assumptions of behavioral finance theory. A high reading on the VIX marks periods of higher stock market volatility. Market observers use the VIX to gauge market sentiment by reading the levels of implied volatility in the broad market. The study concludes that EWMA12 model fears well in the stock market while GARCH model is appropriate for modelling volatility in the forex market. We select a total of 2665 sample data from January 4, 2002, to December 31, 2012. Full sample B obviously decreases or increases in a larger degree than before its release. Secondary Data - Used for identifying relation between oil prices and stock markets. 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. The author has stated that significant autocorrelation function of absolute returns over several lags decaying slowly to zero is the typical manifestation of the volatility clustering phenomenon. 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. As such, the risk of shareholders increases which corresponds to an equal increase in the returns. During the process of model estimation, the smoothness requirement is less than 1. Discuss the factors influencing the volatility of agricultural commodity prices and the mechanisms available for governments and businesses to manage these price movements. Overall, their results support the presence of positive volatility spillover from other markets to the Indian market. The author argues that returns of the index follow leptokurtic distribution and their volatility exhibits clustering. Big adjustment in this phase is led by excessive speculation.