Abstract
We examine the relationship between return and volatility of the stock markets and macroeconomic fundamentals for the G-7 countries by using monthly data ranging from July 1985 to June 2015. To meet this end, we apply the spillover index approach based on the generalized VAR framework developed by Diebold and Yilmaz (2012, 2014). The empirical analysis shows strong interactions between the returns and volatilities of the G-7 stock markets and the considered set of corresponding macroeconomic factors including industrial production, money supply, interest rates, inflation, oil prices and exchange rates. The return and volatility spillover transmission/reception dynamics of the relationships between these stock markets and the macroeconomic fundamentals have changed after the global financial crisis of 2008. Our findings provide useful insights for investors and policy makers concerned with the unprecedented swings in the stock markets of G-7 countries.
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Ghulam Abbas received his PhD degree in Finance from the School of Economics and Management, University of Chinese Academy of Sciences, Beijing, China in 2017. He is currently working as an Assistant Professor of Finance & Economics at the Sukkur Institute of Business Administration, Sindh, Pakistan. His research interests include Financial Econometrics, Financial Economics, Financial Analysis & Forecasting, & Islamic Finance. He has published his work including the Journal of Economic Studies, International Journal of Monetary Economics and Finance, and Journal of Systems Science and Information etc.
Shawkat Hammoudeh is a Palestinian American with a Ph.D. in Economics from the University of Kansas, USA. He also had post-doctorate courses in Finance at Drexel University, USA. After Graduation from the University of Kansas, Dr. Hammoudeh joined the Kuwait Institute for Scientific Research as an Associate Research Scientist. He then worked for OAPEC in Kuwait as a senior economist. Currently, Dr. Hammoudeh is a professor of economics at Drexel University. His fields of specialization include OPEC oil pricing strategies, commodity markets, exchange rates and business cycles in the GCC bloc, stock markets in the GCC region and the MENA area, financial risk management for Islamic and conventional stock and sukuk markets. He has served as an editor/special editor of refereed journals and edited books. He is an associate editor of Energy Economics and a handling editor of Emerging Markets Review and Journal of International Financial Markets & Institutions.
Syed Jawad Hussain SHAHZAD is Professor of Finance at Finance, Control and Law Department of Montpellier Business School, Montpellier France. His areas of research interest include applied financial econometrics. He is currently at editorial board of reputed Journals.
Shouyang Wang received his PhD degree in Operations Research from the Institute of Systems Science, Chinese Academy of Sciences, China, in 1986. He is currently a Bairen Distinguished Professor of Management Science at the Academy of Mathematics and Systems Science, Chinese Academy of Sciences and a Changjiang Chair Professor of Management Science and Engineering at the University of Chinese Academy of Sciences. He was the President of the International Society of Knowledge and Systems Sciences and is currently the President of the China Society of Systems Engineering. He is a fellow of the World Academy of Sciences, an academician of International Academy of Systems and Cybernetics Sciences, and a fellow of Asia Pacific Industrial Engineering and Management Society. He is the author or coauthor of 30 monographs, of which 15 published by Springer-Verlag, and more than 300 papers in leading journals. He is/was a co-editor of 16 journals including Information & Management and Energy Economics. He was a guest editor of special issues/volumes of more than 15 journals including Decision Support Systems, Annals of Operations Research and European Journals of Operational Research. His research interests include decision analysis, risk management, economic analysis and forecasting.
Yunjie Wei received her PhD degrees in Academy of Mathematics and Systems Science, Chinese Academy of Sciences in 2017 and City University of Hong Kong in 2018. She is currently an assistant professor in Academy of Mathematics and Systems Science, Chinese Academy of Sciences, China. Her research interests include economic modeling, analysis and forecasting. She has published over 10 papers in journals including Applied Energy, IEEE Transactions on Systems, Man, and Cybernetics: Systems, Journal of Systems Science and Complexity, Atmospheric Pollution Research etc.
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Abbas, G., Hammoudeh, S., Shahzad, S.J.H. et al. Return and Volatility Connectedness between Stock Markets and Macroeconomic Factors in the G-7 Countries. J. Syst. Sci. Syst. Eng. 28, 1–36 (2019). https://doi.org/10.1007/s11518-018-5371-y
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DOI: https://doi.org/10.1007/s11518-018-5371-y