TY - UNPB
T1 - Supply Chain Constraints and the Predictability of the Conditional Distribution of International Stock Market Returns and Volatility
AU - Bouria, Elie
AU - Cepni, Oguzhan
AU - Gupta, Rangan
AU - Liu, Ruipeng
PY - 2024/9
Y1 - 2024/9
N2 - This paper analyses the effect of supply constraints on international stock market volatility and while also considering their effect on stock returns. Using higher-order nonparametric causality-in-quantiles tests and daily data for China, France, Germany, Italy, Spain, the United Kingdom, the United States, and overall Europe, we find strong evidence of Granger causality flowing from supply constraints to the entire conditional distribution of stock returns and volatility. Notably, supply constraints positively predict stock volatility. This positive predictability remains robust when using alternative measures, including monthly realized variance and different metrics of supply constraints. Our findings have implications for investors and policymakers.
AB - This paper analyses the effect of supply constraints on international stock market volatility and while also considering their effect on stock returns. Using higher-order nonparametric causality-in-quantiles tests and daily data for China, France, Germany, Italy, Spain, the United Kingdom, the United States, and overall Europe, we find strong evidence of Granger causality flowing from supply constraints to the entire conditional distribution of stock returns and volatility. Notably, supply constraints positively predict stock volatility. This positive predictability remains robust when using alternative measures, including monthly realized variance and different metrics of supply constraints. Our findings have implications for investors and policymakers.
KW - Supply constraints
KW - Stock markets volatility
KW - Higher-order nonparametric
KW - Causality-in-quantiles test
KW - Supply constraints
KW - Stock markets volatility
KW - Higher-order nonparametric
KW - Causality-in-quantiles test
M3 - Working paper
T3 - Working Paper Series / Department of Economics. University of Pretoria
BT - Supply Chain Constraints and the Predictability of the Conditional Distribution of International Stock Market Returns and Volatility
PB - University of Pretoria
CY - Pretoria
ER -