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Article
Publication date: 26 June 2019

Donglian Ma and Hisashi Tanizaki

The purpose of this paper is to investigate how the selection of return distribution impacts estimated volatility in China’s stock market.

219

Abstract

Purpose

The purpose of this paper is to investigate how the selection of return distribution impacts estimated volatility in China’s stock market.

Design/methodology/approach

The authors use a Bayesian analysis of fat-tailed stochastic volatility (SV) model with Student’s t-distribution, and conduct an out-of-sample test with realized volatility.

Findings

Empirical analysis results indicate that fat-tailed SV model performs better in capturing the dynamics of daily returns. The authors find that asymmetry, holiday and day of the week effects are detected in estimated volatility. However, the out-of-sample comparison shows that fat-tailed SV models fail to outperform SV models with normal distribution in fitting and predicting realized volatility.

Originality/value

The contribution of this paper to existing literature is twofold. First, it proves that fat-tailed SV models with Student’s t-distribution perform better than normally distributed SV models in fitting daily returns of China’s stock market. Second, this paper takes asymmetry, holiday and day of the week effects into consideration at the same time in the fat-tailed SV model.

Details

China Finance Review International, vol. 11 no. 2
Type: Research Article
ISSN: 2044-1398

Keywords

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Article
Publication date: 10 October 2023

Zhaoying Lu and Hisashi Tanizaki

This study aims to investigate how the gold return and its volatility respond to the COVID-19 pandemic.

102

Abstract

Purpose

This study aims to investigate how the gold return and its volatility respond to the COVID-19 pandemic.

Design/methodology/approach

Stochastic volatility (SV) models are conducted to examine the response of gold to the number of new confirmed cases and deaths.

Findings

The results indicate that an increase in the change rate of the number of COVID-19 infections or fatalities leads to heightened volatility in gold prices. Moreover, the results suggest that gold volatility is more sensitive to the impacts from high-income countries than by those from middle- and low-income countries. In addition, the asymmetric effect is detected in the gold price volatility, which is contrary to the typical asymmetric effect seen in the stock market. Furthermore, the results remain robust after accounting for the US dollar and the volatility index in relation to gold returns.

Practical implications

This study presents whether and to what extent gold is incorporated in the information related to the number of COVID-19 cases and deaths.

Originality/value

This study augments the existing literature by exploring how the number of COVID-19 infections and fatalities influences gold prices. In addition, it examines the day-of-the-week and asymmetric effects that may contribute to the volatility of gold prices. To the best of the authors’ knowledge, the evolution of gold has not yet been investigated using SV models.

Details

Studies in Economics and Finance, vol. 40 no. 5
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 17 July 2019

Donglian Ma and Hisashi Tanizaki

The purpose of this paper is to examine the day-of-the-week effects of Bitcoin (BTC) markets on the exchange level from January 2014 to September 2018.

620

Abstract

Purpose

The purpose of this paper is to examine the day-of-the-week effects of Bitcoin (BTC) markets on the exchange level from January 2014 to September 2018.

Design/methodology/approach

The in-depth study on the day-of-the-week effects is conducted by using data consisting of Bitcoin prices denominated in 20 fiat currencies from 23 Bitcoin trading exchanges through the method of rolling sample for calendar effect proposed by Zhang et al. (2017).

Findings

It is shown by the empirical results that different patterns of the day-of-the-week effects are observed on Bitcoin denominated in various fiat currencies by referring to the price data collected from exchanges. Furthermore, the patterns of the day-of-the-week effects are also available after adjusting Bitcoin prices denominated in domestic currencies into USD.

Research limitations/implications

Because of the discontinuity of data for some daily return series, estimation with dynamic variance is not applicable. It is assumed that the error item follows normal distribution with constant variance.

Originality/value

The day-of-the-week effects are wide-spread in Bitcoin markets, and they are not mainly caused by movements of foreign exchange rates. Actually, empirical findings in this study provide evidence for inefficiency of Bitcoin markets.

Details

China Finance Review International, vol. 9 no. 4
Type: Research Article
ISSN: 2044-1398

Keywords

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