TY - JOUR
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 - 2025/2
Y1 - 2025/2
N2 - This paper analyses the effect of supply constraints on international stock market volatility, while also considering its effect on stock returns. Using a higher-order nonparametric causality-in-quantiles test 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 alternative measures are used, including monthly realized variance and different metrics of supply constraints. Our findings have significant implications for investors and policymakers.
AB - This paper analyses the effect of supply constraints on international stock market volatility, while also considering its effect on stock returns. Using a higher-order nonparametric causality-in-quantiles test 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 alternative measures are used, including monthly realized variance and different metrics of supply constraints. Our findings have significant implications for investors and policymakers.
KW - Supply constraints
KW - Stock markets volatility
KW - Higher-order nonparametric causality-in-quantiles test
KW - Supply constraints
KW - Stock markets volatility
KW - Higher-order nonparametric causality-in-quantiles test
U2 - 10.1016/j.econlet.2025.112176
DO - 10.1016/j.econlet.2025.112176
M3 - Journal article
SN - 0165-1765
VL - 247
JO - Economics Letters
JF - Economics Letters
M1 - 112176
ER -