What drives U.S. financial sector volatility? A Bayesian model averaging perspective

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216224%3A14560%2F20%3A00116660" target="_blank" >RIV/00216224:14560/20:00116660 - isvavai.cz</a>
Result on the web
<a href="https://www.sciencedirect.com/science/article/pii/S0275531919302697#" target="_blank" >https://www.sciencedirect.com/science/article/pii/S0275531919302697#</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1016/j.ribaf.2019.101095" target="_blank" >10.1016/j.ribaf.2019.101095</a>

Result language
angličtina
Original language name
What drives U.S. financial sector volatility? A Bayesian model averaging perspective
Original language description
We investigate the driving forces behind the quarterly stock price volatility of firms in the U.S. financial sector over the period from 1990 to 2017. The driving forces represent a set of 28 economic indicators that are routinely used to detect financial instability and crises and correspond to the development of the financial, monetary, real, trade and fiscal sector as well as to the development of the bond and equity markets. The dimensionality and model choice uncertainty are addressed using Bayesian model averaging, which led to the identification of only seven variables that tend to systematically drive the stock price volatility of financial firms in the U.S.: housing prices, short-term interest rates, net national savings, default yield spread, and three credit market variables. We also confirm that our results are not an artefact of volatility associated with market downturns (for negative semi-volatility), as the results are similar even when market volatility is associated with market upsurge (positive semi-volatility). Given the identified drivers, our results provide supporting empirical evidence that dampening credit cycles might lead to decreased volatility in the financial sector.
Czech name
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Czech description
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Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
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OECD FORD branch
50206 - Finance

Project
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Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year
2020
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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