Macroeconomic Volatility and Stock Market Volatility, World-Wide

35 Pages Posted: 25 Aug 2008

See all articles by Francis X. Diebold

Francis X. Diebold

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Kamil Yilmaz

Koc University

Date Written: August 25, 2008

Abstract

Notwithstanding its impressive contributions to empirical financial economics, there remains a significant gap in the volatility literature, namely its relative neglect of the connection between macroeconomic fundamentals and asset return volatility. We progress by analyzing a broad international cross section of stock markets covering approximately forty countries. We find a clear link between macroeconomic fundamentals and stock market volatilities, with volatile fundamentals translating into volatile stock markets.

Keywords: Financial market, equity market, asset return, risk, variance, asset pricing

JEL Classification: G1, E0

Suggested Citation

Diebold, Francis X. and Yilmaz, Kamil, Macroeconomic Volatility and Stock Market Volatility, World-Wide (August 25, 2008). PIER Working Paper No. 08-031, Available at SSRN: https://ssrn.com/abstract=1254822 or http://dx.doi.org/10.2139/ssrn.1254822

Francis X. Diebold (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-1507 (Phone)
215-573-4217 (Fax)

HOME PAGE: http://www.ssc.upenn.edu/~fdiebold/

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Kamil Yilmaz

Koc University ( email )

Rumeli Feneri Yolu
Sariyer
Istanbul, 34450
Turkey
+90 212 338 1458 (Phone)
+90 212 338 1653 (Fax)

HOME PAGE: http://https://sites.google.com/view/kamilyilmaz/

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