Volatility and Correlations in Stock Markets: The case of US S&P 500, Japan Nikkei 225 and DAX indices
Volatility and Correlations in Stock Markets: The case of US S&P 500, Japan Nikkei 225 and DAX indices

Author(s): Miloš Bikár, Miroslav KMEŤKO, Katarina Vavrová, Peter Badura
Subject(s): Business Economy / Management, Economic policy, Financial Markets
Published by: Masarykova univerzita nakladatelství
Keywords: stock price indices; market and exchange rate volatility; price correlations; monetary policy; behavioural effects;
Summary/Abstract: Movements on the global financial markets are nowadays interconnected and influenced by both fundamental and behavioural or psychological effects. During the last couple of years, besides of standard corporate results and predictions, the market volatility is significantly trigger by monetary policies of central banks and policy makers. Nevertheless, many investors find stock market indices as an appropriate way for their investments, especially at time of low bond yields. The objective of this paper is to analyse the time-varying nature of selected world stock market indices by using a correlation model as well as to evaluate the influence of behavioural effects of market participants on the volatility. The output from the model confirmed the negative correlation among selected stock indices and volatility, while real effective exchange rates effect differs. The paper highlights key aspect having weight on stock markets mainly the central bank monetary policies, public debts, currency pair fluctuations, as well as inflation levels.

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