Publicação
The news impact curve: An analysis of dollar denominated credit markets
| Resumo: | Financial asset prices mirror investors’ expectations and risk perception, which translate into volatility. This volatility, or investment risk, is a key part of the investment decision and has been the target of several studies for several asset classes throughout the years. This study aims to determine if the conditional volatility of credit markets in dollars can be modelled, and if so, if it can be explained by external regressors. Building on existing frameworks, several ARCH type structures will be tested, including those which allow for leverage and asymmetry effects. Monthly returns of the Bloomberg Barclays Investment Grade USD index are going to be analysed and fitted, and the external variables used, based on literature review, include macroeconomic releases, macro prudential indicators and general news flow that can induce uncertainty, and therefore volatility. For the later, the EPU index will be used as a proxy. Analysis of the modelled structures conclude that it is possible to model conditional volatility using the aforementioned variables, with an EGARCH model. Further research is recommended to explore interest rate and excess returns components’ isolated response to these variables, which could strengthen the model. |
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| Autores principais: | Caldeira, Teresa Maria Pinto |
| Assunto: | Financial econometrics Financial markets modeling Garch Financial forecasts Econometria financeira Modelização de mercados financeiros Estimativas financeiras Gestão do risco Investimento financeiro Mercado financeiro Volatilidade Analise econométrica -- Econometric analysis Estimativa Trabalho de projeto |
| Ano: | 2019 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | ISCTE |
| Idioma: | inglês |
| Origem: | Repositório ISCTE |
| Resumo: | Financial asset prices mirror investors’ expectations and risk perception, which translate into volatility. This volatility, or investment risk, is a key part of the investment decision and has been the target of several studies for several asset classes throughout the years. This study aims to determine if the conditional volatility of credit markets in dollars can be modelled, and if so, if it can be explained by external regressors. Building on existing frameworks, several ARCH type structures will be tested, including those which allow for leverage and asymmetry effects. Monthly returns of the Bloomberg Barclays Investment Grade USD index are going to be analysed and fitted, and the external variables used, based on literature review, include macroeconomic releases, macro prudential indicators and general news flow that can induce uncertainty, and therefore volatility. For the later, the EPU index will be used as a proxy. Analysis of the modelled structures conclude that it is possible to model conditional volatility using the aforementioned variables, with an EGARCH model. Further research is recommended to explore interest rate and excess returns components’ isolated response to these variables, which could strengthen the model. |
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