Stock return-inflation nexus; revisited evidence based on nonlinear ARDL

Alqaralleh, Huthaifa

doi:10.1080/15140326.2019.1706828

Cited by 20 publications

(12 citation statements)

References 38 publications

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“…To the best of the authors’ knowledge, we have not been able to track previous applications of the ARDL method in studying availability or access-related parameters of food security. However, there are abundant examples of an effective utilization of the ARDL in revealing the interplays between domestic supply and imports [ 53 , 95 ], trade balances [ 53 , 96 , 97 ], inflation [ 98 , 99 ], international currency exchange [ 100 , 101 ], and health [ 102 ].

where Δ = first difference operator;

= constant term;

= short-run elasticities of the variables; i = ARDL model lag order;

= error correction term;

= error disturbance; t = time.…”

Section: Methodsmentioning

confidence: 99%

Impacts of COVID-19 on Trade and Economic Aspects of Food Security: Evidence from 45 Developing Countries

Erokhin

Tianming

2020

IJERPH

245

173

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The stability of food supply chains is crucial to the food security of people around the world. Since the beginning of 2020, this stability has been undergoing one of the most vigorous pressure tests ever due to the COVID-19 outbreak. From a mere health issue, the pandemic has turned into an economic threat to food security globally in the forms of lockdowns, economic decline, food trade restrictions, and rising food inflation. It is safe to assume that the novel health crisis has badly struck the least developed and developing economies, where people are particularly vulnerable to hunger and malnutrition. However, due to the recency of the COVID-19 problem, the impacts of macroeconomic fluctuations on food insecurity have remained scantily explored. In this study, the authors attempted to bridge this gap by revealing interactions between the food security status of people and the dynamics of COVID-19 cases, food trade, food inflation, and currency volatilities. The study was performed in the cases of 45 developing economies distributed to three groups by the level of income. The consecutive application of the autoregressive distributed lag method, Yamamoto’s causality test, and variance decomposition analysis allowed the authors to find the food insecurity effects of COVID-19 to be more perceptible in upper-middle-income economies than in the least developed countries. In the latter, food security risks attributed to the emergence of the health crisis were mainly related to economic access to adequate food supply (food inflation), whereas in higher-income developing economies, availability-sided food security risks (food trade restrictions and currency depreciation) were more prevalent. The approach presented in this paper contributes to the establishment of a methodology framework that may equip decision-makers with up-to-date estimations of health crisis effects on economic parameters of food availability and access to staples in food-insecure communities.

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where Δ = first difference operator;

= constant term;

= short-run elasticities of the variables; i = ARDL model lag order;

= error correction term;

= error disturbance; t = time.…”

Section: Methodsmentioning

confidence: 99%

Impacts of COVID-19 on Trade and Economic Aspects of Food Security: Evidence from 45 Developing Countries

Erokhin

Tianming

2020

IJERPH

245

173

View full text Add to dashboard Cite

show abstract

“…The literature on the nexus between stock market returns and inflation is well documented. Most recently, Alqaralleh (2020) in a study on the nexus between stock market returns and inflation for the G7 countries; revisited evidence based on nonlinear ARDL, established that expansionary period increase stock market returns more than contractionary period, thereby supporting the Fisher effect. Also supporting the Fisher hypothesis, Kwofie and Ansah (2018) examined the effect of inflation on stock market returns in Ghana and found a positive long‐run relationship between inflation and stock market returns.…”

Section: Introductionmentioning

confidence: 99%

Testing the nexus between stock market returns and inflation in Nigeria: Does the effect of COVID ‐19 pandemic matter?

et al. 2020

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Given the palpable fear generated by the threat of COVID‐19 pandemic and the bearish sentiments of stock investors, this study represents one of the first efforts towards testing the effect of COVID‐19 on the stock market returns‐inflation relationship. Specifically, the study investigates the stock market returns–inflation nexus by controlling for the effect of COVID‐19 pandemic in Nigeria from February 27, 2020 to April 30, 2020. Using the estimation procedures based on the generalized autoregressive conditional heteroskedasticity type models (GARCH (1,1), the GJR‐GARCH), and the accounting innovation tests, our results show that COVID‐19 increases volatility and distorts the positive relationship between inflation and stock market returns, which tends to negate the Fisher's hypothesis. In addition, the results reveal that the negative effects of COVID‐19 on the market returns and its disruption to the stock market returns—inflation relationship may not die away rapidly considering that the duration of the pandemic is unknown. Further, these findings are validated by the innovation accounting tests. Therefore, the study presents to policymakers the consequences of COVID‐19 and the urgent need to strengthen the market through collaborative efforts.

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“…Due to the requirement of bounds testing, first, we check the all-time series for unit root on the second difference to make sure that not any I (2) variables are involved. Following Enders and Lee (2012)'s suggestion, we use Augmented Dickey and Fuller (1981) test and Phillips and Perron (1988) Following Alqaralleh (2020) we check for cointegration between CDS and VIX, we apply the Wald test, and find joint F-statistics to exceed the 95% upper critical bounds confirming cointegration. And we apply the Wald tests for symmetry to check for possible asymmetric dynamics.…”

Section: Empirical Findings and Discussionmentioning

confidence: 99%

The Relationship Between Volatility and Sovereign Credit Risk in the Emerging Markets: A Nonlinear ARDL Approach

Yiğit¹,

Aliyev²

2022

Ege Akademik Bakis (Ege Academic Review)

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This study investigates the short-and long-run nexus between the volatility index of VIX and sovereign credit risk represented by CDS spread in emerging markets, namely Turkey, China, Russia, Brazil, and Mexico. The emerging markets are at the center of investors' interest due to high return opportunities. The relationship between volatility and sovereign credit risk has been studied many times via linear models. However, financial series exhibit asymmetric dynamics, as volatility clustering, excess kurtosis, and others. Thus, we use nonlinear autoregressive distributed lags (NARDL) analysis to capture nonlinear relations between the volatility and the sovereign credit risks of these countries by using daily data from 04.01.2010 to 29.11.2019. The bounds test of the NARDL model confirms the cointegration between VIX and CDS spreads of the countries under study. The analysis of estimated NARDL parameters shows that negative shocks of the volatility index have a long-lasting impact on CDS spreads. Chinese CDS spread are more sensitive to VIX index changes in the short run. The effect of a decrease in volatility on Russian CDS spread is higher than the effect of an increase. Turkish and Brazilian CDS spreads are more reactive to increase in the VIX, whereas Mexican CDS is less sensitive. These findings show that investors, arbitrageurs and speculators should consider global indicators when taking a position on sovereign bonds of emerging markets.

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Stock return-inflation nexus; revisited evidence based on nonlinear ARDL

Cited by 20 publications

References 38 publications

Impacts of COVID-19 on Trade and Economic Aspects of Food Security: Evidence from 45 Developing Countries

Impacts of COVID-19 on Trade and Economic Aspects of Food Security: Evidence from 45 Developing Countries

Testing the nexus between stock market returns and inflation in Nigeria: Does the effect of COVID ‐19 pandemic matter?

The Relationship Between Volatility and Sovereign Credit Risk in the Emerging Markets: A Nonlinear ARDL Approach

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