The U.S. term structure and return volatility in emerging stock markets
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Dosyalar
Tarih
2020-05-29
Yazarlar
Dergi Başlığı
Dergi ISSN
Cilt Başlığı
Yayıncı
Springer
Erişim Hakkı
info:eu-repo/semantics/closedAccess
Özet
This paper examines the predictive power of the U.S. term structure over return volatility in emerging stock markets. Decomposing the term structure of U.S. Treasury yields into two components, the expectations factor and the maturity premium, we show that the U.S. term structure indeed contains predictive information over emerging stock market volatility, even after controlling for country specific factors including turnover and market size. While we observe heterogeneous patterns across emerging markets in terms of their predictability with respect to the U.S. term structure, we find that the market’s expectation of future short term rates, implied by the expectations factor, serves as a stronger predictor of stock market volatility compared to the maturity premium component of the yield spread. We also find that the U.S. term structure has gained further predictive value following the global financial crisis, particularly for the BRICS nations of China, Russia, and S. Africa. Overall, our findings suggest that policymakers and investors can utilize interest rate signals from the U.S. Treasury yields to make projections over stock market volatility in their local markets, however, distinguishing between the two components of the yield curve could provide additional forecasting power depending on the country of focus.
Açıklama
Anahtar Kelimeler
Maturity premium, Stock market volatility, expectations factor, Term structure of interest rates
Kaynak
Journal of Economics and Finance
WoS Q Değeri
Scopus Q Değeri
Q3
Cilt
Sayı
Künye
Demirer, R., Yüksel, A. & Yüksel, A. (2020). The U.S. term structure and return volatility in emerging stock markets. Journal of Economics and Finance, 1-21. doi:10.1007/s12197-020-09511-x
