Research on the Time-Varying Relationship between Macroeconomic Variables and the Stock Market Volatility Based on TVP-VAR Model

Shuang  Jin; Wei Chong  Choo; Matemilola Bolaji  Tunde; Yuxing  Liu; Yijie  Wang; Wan Cheong  Kin

doi:10.6180/jase.202502_28(2).0008

Research on the Time-Varying Relationship between Macroeconomic Variables and the Stock Market Volatility Based on TVP-VAR Model

Computer Science and Information Engineering

Shuang Jin¹, Wei Chong Choo¹This email address is being protected from spambots. You need JavaScript enabled to view it., Matemilola Bolaji Tunde¹, Yuxing Liu¹, Yijie Wang¹, and Wan Cheong Kin²

¹School of Business and Economics, Universiti Putra Malaysia, 43400 Seri Kembangan, Selangor, Malaysia

²Department of Economics and Corporate Administration, Faculty of Accountancy, Finance and Business, Tunku Abdul Rahman University of Management and Technology (TARUMT)

Received: November 10, 2023
Accepted: December 12, 2023
Publication Date: April 14, 2024

Copyright The Author(s). This is an open access article distributed under the terms of the Creative Commons Attribution License (CC BY 4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are cited.

Download Citation: ||https://doi.org/10.6180/jase.202502_28(2).0008

Chinese stock market is of great importance in promoting the healthy development of national economy and world economic integration. Effectively preventing risks and ensuring the safe and stable operation of the stock market is particularly crucial, which urgently needs to accurately depict the stock market volatility characteristics. Previous studies have overlooked the possible disturbances, which may cause the deviation of models with time-varying coefficients but constant volatility. For addressing this issue, this paper proposes to assume random volatilities via TVP-VAR (Time-Varying Parameter Vector AutoRegression) model estimated by MCMC (Markov Chain Monte Carlo) method. Benefited from accurately estimating and predicting, this paper provides a comprehensive interpretation of volatility effects of Chinese stock market. This paper has the important reference value for financial regulatory authorities and market investors.

Keywords: Stock market; TVP-VAR model; Stock market volatility; Macroeconomic variables; Stochastic volatility

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