Journal
JOURNAL OF BANKING & FINANCE
Volume 66, Issue -, Pages 89-101Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.jbankfin.2016.02.005
Keywords
Stock market volatility; Business cycle; Bivariate causality; Multivariate causality; Linear and nonlinear causality tests
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Funding
- National Science Centre, Poland [UMO-2014/13/B/HS4/01556]
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This paper investigates the relationship between stock market volatility and the business cycle in four major economies, namely the US, Canada, Japan and the UK. We employ both linear and nonlinear bivariate causality tests and we further conduct a multivariate analysis to explore possible spillover effects across countries. Our results suggest that there is a bidirectional causal relationship between stock market volatility and the business cycle within each country and additionally reveal that the recent financial crisis plays an important role in this context. Finally, we identify a significant impact of the US on the remaining markets. (C) 2016 Elsevier B.V. All rights reserved.
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