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.
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.
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Keywords
Zhaoying Lu and Hisashi Tanizaki
This study aims to investigate how the gold return and its volatility respond to the COVID-19 pandemic.
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.
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Keywords
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.
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.