How the Quantitative Easing Affect the Spillover Effects between the Metal Market and United States Dollar Index?
DOI:
https://doi.org/10.6000/1929-7092.2016.05.22Keywords:
Spillover effect, United States dollar index, Metal market, Quantitative easingAbstract
This study explores both return and volatility spillover effects, the co-integration relation and the correlative relationship between the metal market in London metal exchange and United States exchange rate market, and the risk premium and leverage effect in each of these two markets for the periods before and during quantitative easing (QE). Empirical results show that, as the QE is executed the risk premium in US exchange rate market will disappear; and the speed and direction of the adjustment back to equilibrium respectively becomes greater and is reversed for the co-integration relation in metal market. Regarding these two markets only the return spillover effect is affected, and the degree of negative correlative relationship becomes more obvious as the QE is executed.References
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Su, J.B. 2015. “Value-at-risk estimates of the stock indices in developed and emerging markets including the spillover effects of currency market.” Economic Modelling 46: 204-224.
http://dx.doi.org/10.1016/j.econmod.2014.12.022
Zaghini, A. and Colarossi, S. 2009. “Gradualism, transparency and the improved operational framework: a look at overnight volatility transmission.” International Finance 12(2): 151–170.
http://dx.doi.org/10.1111/j.1468-2362.2009.01241.x
Zhao, H. 2010. “Dynamic relationship between exchange rate and stock price: Evidence from China.” Research in International Business and Finance 24(2): 103–112.
http://dx.doi.org/10.1016/j.ribaf.2009.09.001
http://dx.doi.org/10.1016/j.matcom.2013.01.001
Antonakakis, N. 2012. “Exchange return co-movements and volatility spillovers before and after the introduction of euro.” Journal of International Financial Markets, Institutions & Money 22(5): 1091–1109.
http://dx.doi.org/10.1016/j.intfin.2012.05.009
Baba, Y., Engle, R.F., Kraft, D.K. and Kroner, K. 1990. “Multivariate simultaneous generalized ARCH.” Unpublished Manuscript, University of California.
Dean, W.G., Faff, R.W. and Loudon, G.F. 2010. “Asymmetry in return and volatility spillover between equity and bond markets in Australia.” Pacific-Basin Finance Journal 18(3): 272–289.
http://dx.doi.org/10.1016/j.pacfin.2009.09.003
Efron, B. 1979. “Bootstrap Methods: Another Look at the Jackknife.” The Annals of Statistics 7(1): 1-26.
http://dx.doi.org/10.1214/aos/1176344552
Fama, E. 1965. “The behavior of stock market prices.” Journal of Business 38(1): 34–105.
http://dx.doi.org/10.1086/294743
Glosten, L.R., Jagannathan, R. and Runkle, D.E. 1993. “On the relation between the expected value and the volatility of the nominal excess return on stocks.” Journal of Finance 48(5): 1779–1801.
http://dx.doi.org/10.1111/j.1540-6261.1993.tb05128.x
Jarque, C.M. and Bera, A.K. 1987. “A test for normality of observations and regression residuals.” International Statistics Review 55(2): 163–172.
http://dx.doi.org/10.2307/1403192
Karras, G. 2013. “Asymmetric effects of monetary policy with or without Quantitative Easing: Empirical evidence for the US.” The Journal of Economic Asymmetries 10(1): 1–9.
http://dx.doi.org/10.1016/j.jeca.2013.04.001
Kitamura, Y. 2010. “Testing for intraday interdependence and volatility spillover among the euro, the pound and the Swiss franc markets.” Research in International Business and Finance 24(2): 158–171.
http://dx.doi.org/10.1016/j.ribaf.2009.11.002
Lee, Y.H. 2013. “Global and regional range-based volatility spillover effects.” Emerging Markets Review 14: 1–10.
http://dx.doi.org/10.1016/j.ememar.2012.09.007
Lyonnet, V. and Werner, R. 2012. “Lessons from the Bank of England on ‘quantitative easing’ and other ‘unconventional’ monetary policies.” International Review of Financial Analysis 25: 94–105.
http://dx.doi.org/10.1016/j.irfa.2012.08.001
Mandelbrot, B. 1963. “The variation of certain speculative prices.” Journal of Business 36(4): 394–419.
http://dx.doi.org/10.1086/294632
McMillan, D.G. and Speight, A.E.H. 2010. “Return and volatility spillovers in three euro exchange rates.” Journal of Economics and Business 62(2): 79–93.
http://dx.doi.org/10.1016/j.jeconbus.2009.08.003
Mensi, W., Beljid, M., Boubaker, A. and Managi, S. 2013. “Correlations and volatility spillovers across commodity and stock markets: Linking energies, food, and gold.” Economic Modelling 32: 15–22.
http://dx.doi.org/10.1016/j.econmod.2013.01.023
Merton, R.C. 1980. “On estimating the expected return on the market: an exploratory investigation.” Journal of Financial Economics 8(4): 323–361.
http://dx.doi.org/10.1016/0304-405X(80)90007-0
Moschini, G.C. and Myers, R.J. 2002. “Testing for constant hedge ratios in commodity markets: a multivariate GARCH approach.” Journal of Empirical Finance 9(5): 589–603.
http://dx.doi.org/10.1016/S0927-5398(02)00012-9
Nakazono, Y. and Ueda, K. 2013. “Policy commitment and market expectations: Lessons learned from survey based evidence under Japan’s quantitative easing policy.” Japan and the World Economy 25: 102–113.
http://dx.doi.org/10.1016/j.japwor.2013.03.004
Nelson, D.B. 1991. “Conditional heteroskedasticity in asset returns: a new approach.” Econometrica 59: 347-370.
http://dx.doi.org/10.2307/2938260
Schenkelberg, H. and Watzka, S. 2013. “Real effects of quantitative easing at the zero lower bound: Structural VAR-based evidence from Japan.” Journal of International Money and Finance 33: 327–357.
http://dx.doi.org/10.1016/j.jimonfin.2012.11.020
Singh, P., Kumar, B. and Pandey, A. 2010. “Price and volatility spillovers across North American, European and Asian stock markets.” International Review of Financial Analysis 19(1): 55–64.
http://dx.doi.org/10.1016/j.irfa.2009.11.001
Skintzi, V.D. and Refenes, A.N. 2006. “Volatility spillovers and dynamic correlation in European bond markets.” Journal of International Financial Markets, Institutions & Money 16(1): 23–40.
http://dx.doi.org/10.1016/j.intfin.2004.12.003
Su, J.B. 2014. “The interrelation of stock markets in China, Taiwan and Hong Kong and their constructional portfolio’s value-at-risk estimate.” Journal of Risk Model Validation 8(4): 69-127.
http://dx.doi.org/10.21314/JRMV.2014.130
Su, J.B. 2015. “Value-at-risk estimates of the stock indices in developed and emerging markets including the spillover effects of currency market.” Economic Modelling 46: 204-224.
http://dx.doi.org/10.1016/j.econmod.2014.12.022
Zaghini, A. and Colarossi, S. 2009. “Gradualism, transparency and the improved operational framework: a look at overnight volatility transmission.” International Finance 12(2): 151–170.
http://dx.doi.org/10.1111/j.1468-2362.2009.01241.x
Zhao, H. 2010. “Dynamic relationship between exchange rate and stock price: Evidence from China.” Research in International Business and Finance 24(2): 103–112.
http://dx.doi.org/10.1016/j.ribaf.2009.09.001
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Published
2016-08-17
How to Cite
Su, J.-B. (2016). How the Quantitative Easing Affect the Spillover Effects between the Metal Market and United States Dollar Index?. Journal of Reviews on Global Economics, 5, 254–272. https://doi.org/10.6000/1929-7092.2016.05.22
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Special Issue: Trends in Monetary Policy and Future Directions
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