TITLE:
Impact of Macroeconomic Volatility on Stock Market Volatility in Bangladesh
AUTHORS:
Md. Rafiqul Matin
KEYWORDS:
Stock Market Volatility, Macroeconomic Volatility, Conditional Variance, Volatility Clustering, GARCH Family Models, Autoregressive Distributed Lag (ARDL) Cointegration
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.12 No.3,
September
20,
2023
ABSTRACT: This study investigates the impact of macroeconomic volatility on stock
market volatility in Bangladesh employing GARCH and ARDL cointegration models
using monthly data from January 1991 to December 2015. The findings confirm
that none of the selected macroeconomic variables’ volatilities can
significantly explain the long-and short-run stock market volatility. The
variances of the residuals are found unstable for most of the period and the
current volatility is more sensitive to its past values than to new surprises
indicating market inefficiency. Although, the reform initiatives, undertaken
following the catastrophe of 1996, have improved the volatility condition of
the market, but the second catastrophe of 2010 has put a question mark on it.
The outcomes of this study are expected to help regulators and policymakers in
assessing the degree to which the stock market may need to be reformed.