Browsing by Subject "volatiliteetti"

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  • Vuorenmaa, Tommi A. (2005)
    Bank of Finland Research Discussion Papers 27/2005
    This paper investigates the dependence of average stock market volatility on the timescale or on the time interval used to measure price changes, which dependence is often referred to as the scaling law.Scaling factor, on the other hand, refers to the elasticity of the volatility measure with respect to the timescale.This paper studies, in particular, whether the scaling factor differs from the one in a simple random walk model and whether it has remained stable over time.It also explores possible underlying reasons for the observed behaviour of volatility in terms of heterogeneity of stock market players and periodicity of intraday volatility.The data consist of volatility series of Nokia Oyj at the Helsinki Stock Exchange at five minute frequency over the period from January 4, 1999 to December 30, 2002.The paper uses wavelet methods to decompose stock market volatility at different timescales.Wavelet methods are particularly well motivated in the present context due to their superior ability to describe local properties of times series.The results are, in general, consistent with multiscaling in Finnish stock markets.Furthermore, the scaling factor and the long-memory parameters of the volatility series are not constant over time, nor consistent with a random walk model.Interestingly, the evidence also suggests that, for a significant part, the behaviour of volatility is accounted for by an intraday volatility cycle referred to as the New York effect. Long-memory features emerge more clearly in the data over the period around the burst of the IT bubble and may, consequently, be an indication of irrational exuberance on the part of investors. Key words: long-memory, scaling, stock market, volatility, wavelets JEL classification numbers: C14, C22
  • Pesonen, Hanna (1998)
    This paper examines the driving forces in stock market fluctuations in Russia.We found no evidence of a causal relationship running from the emerging stock markets of Asia to Russia.Instead, US and Japanese share price movements seem to have strong implications for Russian share prices. Keywords: Russia, stock markets, causality testing
  • Crowley, Patrick M.; Habibdoust, Amir (2013)
    Bank of Finland Research Discussion Papers 34/2013
    This paper aims to examine the relationship between exchange rate movements and the stock return of firms at different time horizons by employing wavelet analysis. In particular, we use the maximum overlap discrete wavelet transform (MODWT) to decompose the exchange rate movement and the US firm's stock return over the period January 2006 to July 2012. The results reveal that at longer horizons not only does the number of firms which are exposed to exchange rate volatility increase but also the degree of exchange rate exposure increases. What is more, the sensitivity to exchange rate volatility is stronger at longer horizons for importing firms than for exporting firms, which shows an asymmetry in the usage of hedging strategies between importers and exporters. Key words: Discrete Wavelet analysis, Exchange Rate Volatility, Hedging strategy JEL Classification: C32, F31, F23
  • Nyberg, Peter; Vaihekoski, Mika (2011)
    Bank of Finland Research Discussion Papers 14/2011
    This paper gathers the longest available historical monthly return series for the Finnish equity, bond and money markets as well as inflation. The series are analysed to calculate the statistical characteristics of the returns investors would have received in these markets. We also survey existing literature concerning the history of these markets and review the main developments to facilitate future research on the long-term development of the Finnish markets. Using a new total return stock market index for Finland in an approach similar to Mehra and Prescott (2003), we find the equity premium for Finland to be 10.14 per cent from 1913 to 2009.
  • Colciago, Andrea; Rossi, Lorenza (2011)
    Bank of Finland Research Discussion Papers 12/2011
    We propose a flexible prices model where endogenous market structures and search and matching frictions in the labour market interact endogenously. The interplay between firms endogenous entry, strategic interactions among producers and labour market frictions represents a strong amplification channel for technology shocks on labour market variables and helps in addressing the unemployment- volatility puzzle. Consistently with US evidence, new firms create a large fraction of new jobs and grow faster than more mature firms, net entry of firms is procyclical and the price mark-up is countercyclical.
  • Feldkircher, Martin; Horvath, Roman; Rusnak, Marek (2013)
    BOFIT Discussion Papers 11/2013
    Published in Journal of International Money and Finance, Volume 40, February 2014, Pages 21–41
    In this paper, we examine whether pre-crisis leading indicators help explain pressures on the exchange rate (and its volatility) during the global financial crisis. We use a unique data set that covers 149 countries and 58 indicators, and estimation techniques that are robust to model uncertainty. Our results are threefold: First and foremost, we find that price stability plays a pivotal role as a determinant of exchange rate pressures. More specifically, the currencies of countries that experienced higher inflation prior to the crisis tend to be more affected in times of stress. Second, we investigate potential effects that vary with the level of pre-crisis inflation. In this vein, our results reveal that domestic savings reduce the severity of pressures in countries that experienced a low-inflation environment prior to the crisis. Finally, we find evidence of the mitigating effects of international reserves on the volatility of exchange rate pressures. Keywords: Exchange market pressures, financial crisis JEL Codes: F31, F37
  • Égert, Balázs; Morales-Zumaquero, Amalia (2005)
    BOFIT Discussion Papers 8/2005
    This paper attempts to analyze the direct impact of exchange rate volatility on the export performance of ten Central and Eastern European transition economies as well as its indirect impact via changes in exchange rate regimes.Not only aggregate but also bilateral and sectoral export flows are studied.To this end, we first analyze shifts in exchange rate volatility linked to changes in the exchange rate regimes and second, use these changes to construct dummy variables we include in our export function.The results suggest that the size and the direction of the impact of forex volatility and of regime changes on exports vary considerably across sectors and countries and that they may be related to specific periods. JEL: F31 Keywords: exchange rate volatility, export, trade, transition, structural breaks
  • Bask, Mikael (2006)
    Bank of Finland Research Discussion Papers 8/2006
    Published in Frontiers in Finance and Economics (forthcoming)
    Since the magnitude of exchange rate overshooting may not be the same for different exchange rates of a currency, a monetary expansion or contraction in, for example, the EMU, will affect the exchange rate between the U.S. dollar and the yen, even though there are no changes in monetary fundamentals in the U.S. or Japan. This fact is demonstrated in a sticky-price monetary model due originally to Dornbusch (1976) that is enlarged with currency traders that use Chartism in the form of moving averages.It is also demonstrated that purchasing power parity (PPP) does not necessarily hold in long-run equilibrium.These results are interesting since, according to the empirical literature, there are often large movements in nominal exchange rates that are apparently unexplained by macroeconomic fundamentals, and there is also a weak support for PPP.Key words: Chartism, foreign exchange, macroeconomic fundamentals, moving averages, overshooting and PPP JEL classification numbers: F31, F41
  • Laakkonen, Helinä (2007)
    Bank of Finland Research Discussion Papers 23/2007
    Published in Quantitative Finance, Volume 14, Issue 12, 13 December 2014: 2093-2104
    Filtering intraday seasonality in volatility is crucial for using high frequency data in econometric analysis. This paper studies the effects of filtering on statistical inference concerning the impact of news on exchange rate volatility. The properties of different methods are studied using a 5-minute frequency USD/EUR data set and simulated returns. The simulation results suggest that all the methods tend to produce downward-biased estimates of news coefficients, some more than others. The study supports the Flexible Fourier Form method as the best for seasonality filtering. Keywords: high-frequency, volatility, macro announcements, seasonality JEL classification numbers: C22, C49, C52, E44
  • Ahlstedt, Monica (1997)
    Suomen Pankin keskustelualoitteita 7/1997
    The study derives a theoretically and empirically founded procedure for volatility estimation and forecasting of daily financial return series for use in value-at-risk model frameworks.GARCH modelling is applied to account for time varying heteroskedastic conditional variances and covariances.Through univariate estimation, the historical conditional variance models are specified within a group of twelve markka-denominated exchange rates, a group of thirteen short-term interest rates, the long-term interest rate and Finland's general stock market index.Within these groups, the method of principal components is used to detect common short-term factors driving the high frequency stochastic processes.Spectral analysis is applied to identify the length and regularity in the cyclical behaviour of the estimated conditional variances and their principal components.Since there turned out to be a great similarity in the univariate estimation results within groups of rates, GARCH estimation on pooled data was performed to force the rates within groups into the same model.The estimated models on pooled data were found to be integrated in variance with closely similar parameter values for both exchange rates and interest rates. Since a general multivariate framework is not possible to apply to the amount of series in this study due to the huge number of parameters to be identified, the covariances were calculated in two step-wise ways from the univariately estimated variances.First, assuming dependence between the autocorrelation structure of the conditional variances and covariances, univariately estimated parameters of the conditional variance models were used in identifying the pairs of conditional covariances.Second, assuming constant correlations, conditional covariances were estimated using joint information on the correlation coefficients of the GARCH standardized residuals and the univariate conditional variances. The first method is only applicable in estimating covariances within groups, the second is also applied in estimating the covariances between groups. Although the magnitude or direction of the expected changes in rates cannot be forecast, the estimated GARCH structure makes it possible to forecast the expected future variances.By developing the parameter structure estimated on pooled data, a theoretically and empirically founded procedure is suggested to replace the usual ad hoc decision process of selecting the sample period and the weight structure for estimating variances and covariances. Keywords: Time-dependent volatility, GARCH estimation, value-at-risk models
  • Habib, Maurizio Michael (2002)
    BOFIT Discussion Papers 7/2002
    This paper studies the impact of external factors on daily exchange rates and short-term interest rates in the Czech Republic, Hungary and Poland during the period August 1997 - May 2001.Ind that neither exchange rates nor interest rates are influenced by short-term German interest rates.Nevertheless, 1 show that shocks to emerging-market risk premia had a significant impact on exchange rates in all three Central and Eastern European countries and on interest rates in the Czech Republic.In addition, studying the second moment of the variables, 1 demonstrate that Czech and Polish exchange rates were affected by 'volatility contagion' coming from emerging markets. 1 find also some partial support for the 'volatility contagion' hypothesis on Czech interest rates.These findings shed some doubts on the alleged theoretical ability of a floating exchange rate - such as in the Czech Republic - to absorb external shocks and insulate a country's domestic monetary policy completely.However, the spill-over effect on Czech interest rates might be explained by the 'managed' nature of the exchange rate regime, thereby re-establishing some credibility of the theory. Key words: exchange rates, short-term interest rates, volatility, Czech Republic, Hungary, Poland
  • Sierimo, Carolina; Virén, Matti (1995)
    Suomen Pankin keskustelualoitteita; Bank of Finland. Discussion papers 34/1995
    This paper examines the relationships between financial and nonfinancial variables in three Nordic countries (Finland, Norway and Sweden).We try to find out whether there exists some kind of dichotomy between these two sets of variables, both in terms of levels of variables and the respective volatilities.In particular, we scrutinize the role of the stock market (stock prices and stock market turnover) in this respect.The analysis makes use of standard time series analytical tools, cointegration analysis, analysis of Granger causality and cross-spectral analysis.The results of these empirical analyses suggest that, although the behaviour of the financial variables has been quite similar, there are important differences between these three countries.Still, in all countries important relationships between these sets of variables are detected.However, in most cases causality seems to be bidirectional or instantaneous.
  • Annaert, Jan; De Ceuster, Marc J.K.; Valckx, Nico (2001)
    Suomen Pankin keskustelualoitteita 14/2001
    It is commonly agreed that the term spread and stock returns are useful in predicting recessions.We extend these empirical findings by examining interest rate and stock market volatility as additional recession indicators.Both risk-return analysis and the theory of investment under uncertainty provide a rationale for this extension.The results for the United States, Germany and Japan show that interest rate and stock return volatility contribute significantly to the forecasting of future recessions.This holds in particular for short term predictions.Key words: business cycles, stock market volatility, interest rate volatility, probit model
  • Eller, Markus; Fidrmuc, Jarko; Fungáčová, Zuzana (2013)
    BOFIT Discussion Papers 13/2013
    Published in Regional Studies, Volume 50, 2016, Issue 11, p. 1849-1862
    This paper investigates the relationship between fiscal policy and output volatility in Russian regions between 2000 and 2009. System GMM estimation techniques are used to account for potential endogeneity between output volatility and fiscal developments. Our main finding is that fiscal activism, proxied by various measures of discretionary fiscal policy, contributes to output volatility and so induces macroeconomic instability at the regional level in Russia. This result corroborates previous studies using cross-country data. To reduce business cycle fluctuations, it would be necessary to curtail pro-cyclical fiscal activism at the regional level, e.g. via fiscal rules and sound institutions of fiscal federalism. JEL Codes: E32, E62, R11. Keywords: output volatility, automatic stabilizers, discretionary fiscal policy, dynamic panel models, Russia
  • Berganza, Juan Carlos; Broto, Carmen (2011)
    BOFIT Discussion Papers 9/2011
    Published in Journal of International Money and Finance, Volume 31, Issue 2, March 2012, Pages 428-444
    Emerging economies with inflation targets (IT) face a dilemma between fulflling the theoretical conditions of "strict IT", which implies a fully flexible exchange rate, or applying a "flexible IT", which entails a de facto managed floating exchange rate with forex interventions to moderate exchange rate volatility. Using a panel data model for 37 countries we find that, although IT lead to higher exchange rate instability than alternative regimes, forex interventions in some IT countries have been more effective in reducing volatility than in non-IT countries, which may justify the use of "flexible IT" by policymakers. Keywords: Inflation targeting; Exchange rate volatility; Foreign exchange interventions; Emerging economies. JEL codes: E31; E42; E52; E58; F31
  • Kozluk, Tomasz (2008)
    BOFIT Discussion Papers 4/2008
    In a broad sample of developed and emerging economies over the past ten years we apply the approximate factor model in a search for common global and regional driving-forces in stock market returns and volatility. We focus particularly on two emerging stock markets - Russia and China, because of their unique characteristics and performance in the past years. We find that while Russian markets, like the CEEC region, substantially increased their integration with global stock markets, both the Chinese A- and B-share markets continued to move largely independently from global movements and only slightly increased in comovement with regional forces. We provide evidence of a general increase in global comovement of stock markets over the past decade and a decline in the role of regional forces, which imply a decrease of the effectiveness of cross-country hedging strategies. Keywords: stock markets, financial integration, Russia, China, global and regional integration; JEL Classification: F36, G11, G14.
  • Virén, Matti (2005)
    Bank of Finland Research Discussion Papers 8/2005
    Published in International economics, 57 ; 3 ; 2004.
    This paper provides some further tests for the proposition that a larger public sector leads to smaller output volatility. Both Gali and Fatas & Mihov have provided some evidence which appears to support this proposition. Their evidence is, however, based on a relatively small sample of countries. In this study, we go beyond the OECD sample and focus on a much larger World Bank data set covering up to 208 countries for the period 1960-2002.We also seek to utilise some time series aspects of the material by using pooled cross-section time series data. Tests with different models and measures clearly indicate that the original results are not very robust and the relationship between government size and output volatility is either nonexistent or very weak at best. Key words: government, fiscal policy, automatic stabilisers JEL classification numbers: E62, H30, E32
  • Smirnova, Elena (2004)
    BOFIT Online 1/2004
    The paper examines the impact of American Depositary Receipt (ADR) listings on the return of underlying Russian stocks.The contribution of this paper is twofold.First, it looks at a new sample of ADRs issued by Russian companies.Second, the technique used to estimate the market model is different from the previous studies.The returns are modeled to follow a GARCH process, as opposed to the usual OLS procedure, which assumes homoscedasticity in residual returns.Average abnormal returns and cumulative average abnormal returns are calculated for the [-25, +25] event window, with the ADR listing date being the event date.The results indicate a significant negative abnormal local market return on an ADR listing day.Return volatilities after the listing are compared to those before the listing. Eleven out of sixteen companies experienced increased volatility of local returns after cross-listing
  • Saleem, Kashif (2008)
    BOFIT Discussion Papers 8/2008
    Published in Research in International Business and Finance, Volume 23, Issue 3, September 2009, Pages 243-256
    This study considers the linkage of the Russian equity market to the world market, examin-ing the international transmission of the Russia's 1998 financial crisis utilizing the GARCH-BEKK model proposed by Engle and Kroner (1995). We find evidence of direct linkage between the Russian equity market and the world markets with regards to returns and volatility. While the weakness of the linkage suggests that the Russian equity market was only partially integrated into the world market at the time of the crisis, evidence of contagion is clear. Keywords: Multivariate GARCH; Volatility spillovers; Russian Financial crisis; contagion; partial integration JEL Classification: C32, G15.
  • Kempa, Michal (2006)
    Bank of Finland Research Discussion Papers 13/2006
    This paper analyses different operational central bank policies and their impact on the behaviour of the money market interest rate. The model combines profit maximising behaviour by commercial banks with the central bank supplying the liquidity that keeps the market rate on target.It seems that frequent liquidity supplying operations represent an efficient tool to control money market rates.An averaging provision reduces the use of standing facilities and interest rates volatility in all days except for the last day of the maintenance period.Whenever banks have different maintenance horizons both the spikes in volatility and use of standing facilities disappear.The paper also compares two different liquidity supply policies and finds that the level of liquidity necessary to keep the rates on target depends on not only the aggregate but also assets values of individual banks.Key words: Interbank market, interest rate volatility, central bank procedures, open market operations JEL classification numbers: E43, E44, E52