Stock market volatility and business cycle

Evidence from linear and nonlinear causality tests

Taufiq Choudhry, Fotios I. Papadimitriou, Sarosh Shabi

Research output: Contribution to journalArticle

21 Citations (Scopus)
8 Downloads (Pure)

Abstract

This paper investigates the relationship between stock market volatility and the business cycle in four major economies, namely the US, Canada, Japan and the UK. We employ both linear and nonlinear bivariate causality tests and we further conduct a multivariate analysis to explore possible spillover effects across countries. Our results suggest that there is a bidirectional causal relationship between stock market volatility and the business cycle within each country and additionally reveal that the recent financial crisis plays an important role in this context. Finally, we identify a significant impact of the US on the remaining markets.

Original languageEnglish
Pages (from-to)89-101
Number of pages13
JournalJournal of Banking and Finance
Volume66
Early online date22 Feb 2016
DOIs
Publication statusPublished - May 2016

Fingerprint

Causality test
Stock market volatility
Business cycles
Nonlinear causality
Japan
Financial crisis
Multivariate analysis
Canada
Spillover effects

Keywords

  • stock market volatility
  • business cycle
  • bivariate causality
  • multivariate causality
  • linear and nonlinear causality tests

Cite this

Stock market volatility and business cycle : Evidence from linear and nonlinear causality tests. / Choudhry, Taufiq; Papadimitriou, Fotios I.; Shabi, Sarosh .

In: Journal of Banking and Finance, Vol. 66, 05.2016, p. 89-101.

Research output: Contribution to journalArticle

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