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Publicação
Rate movement and market risk: volatility transmission analysis
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Resumo(s)
Globalization has increased the impact that economic decisions from one country have on other
countries. In the current global context, interest rates defined by central banks have an impact on
their corresponding local economy and also on the stock market of other countries in the world.
Therefore, investors should be more aware and develop a better understanding of the impact of
their monetary policy in both the main country of investment and also in countries whose economy
will have a stronger impact on the stock markets (mainly represented in this study as the FTSE100,
DAX250, SMI, SP500, STOXX600, and NIKKEI225). Altogether, this paper attempts to
understand and quantify the impact that changes in interest rates in the United States will have on
the economies of the UK, Germany, Switzerland, Europe, and Japan. To study this issue, we used
multivariate GARCH models, especially running with the BEKK model, and based on our analysis,
we have determined that movements in interest rates do not significantly impact the changes in the
markets studied. However, our model indicates that changes in indices do have an impact on
changes in interest rates. This conclusion opens the door to conducting more studies on variables
that have an effect on central bank interest rate movements.
Descrição
Palavras-chave
Interest rate Asset returns Volatility transmission Global stock markets