Downside Risk and Volatility Dynamics in Financial Markets

Thomas, Alice Carole

Downside Risk and Volatility Dynamics in Financial Markets

Thomas, Alice Carole

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Publication Type:: Thesis
Issue Date:: 2022

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Field	Value	Language
dc.contributor.author	Thomas, Alice Carole
dc.date.accessioned	2022-12-14T00:51:52Z
dc.date.available	2022-12-14T00:51:52Z
dc.date.issued	2022
dc.identifier.uri	http://hdl.handle.net/10453/164383
dc.description	University of Technology Sydney. Faculty of Business.	en_US.UTF-8
dc.description.abstract	This thesis assesses the competence of two new measures for improving the prediction of stock-specific extreme downside risk. Considering an investment strategy that precludes stocks with a high probability of crashing, and irrespective of the forecasting horizon, portfolios benchmarked on the new measures earn the highest risk-adjusted returns than portfolios benchmarked on traditional risk measures. This strategy may serve as tool for fund managers to efficiently time the market. This thesis also confirms the importance of daily volatility persistence in transmitting information from the macro-economy in the volatility of energy markets. Macro-economic factors, such as the VIX, the credit spread, and the Baltic Exchange Dirty Index, have been identified as determinants of oil volatility persistence. These new transmission channels of macro-economic information in the volatility of energy markets offer substantial economic benefits in forecasting volatility. This thesis refines the role of hedgers and speculators in determining oil price volatility via two distinct liquidity provision channels which have opposite effects on volatility. These liquidity provision channels remain significant determinants of oil volatility under different oil market conditions (normal/inverted), and different financial and business cycle risks environments.	en_US.UTF-8
dc.format	Thesis (PhD)
dc.language.iso	en_US	en_US.UTF-8
dc.relation	https://opus.lib.uts.edu.au/bitstream/10453/164383/2/02whole.pdf
dc.rights	The author owns the copyright in this thesis including all reproduction and reuse rights for the work. The work may not be altered without the permission of the copyright owner. Attribution is essential when quoting or paraphrasing from this thesis.
dc.rights	au.edu.uts.lib/ppc
dc.rights	info:eu-repo/semantics/openAccess
dc.title	Downside Risk and Volatility Dynamics in Financial Markets	en_US.UTF-8
dc.type	Thesis
utslib.copyright.status	open_access	*

Abstract:

This thesis assesses the competence of two new measures for improving the prediction of stock-specific extreme downside risk. Considering an investment strategy that precludes stocks with a high probability of crashing, and irrespective of the forecasting horizon, portfolios benchmarked on the new measures earn the highest risk-adjusted returns than portfolios benchmarked on traditional risk measures. This strategy may serve as tool for fund managers to efficiently time the market. This thesis also confirms the importance of daily volatility persistence in transmitting information from the macro-economy in the volatility of energy markets. Macro-economic factors, such as the VIX, the credit spread, and the Baltic Exchange Dirty Index, have been identified as determinants of oil volatility persistence. These new transmission channels of macro-economic information in the volatility of energy markets offer substantial economic benefits in forecasting volatility. This thesis refines the role of hedgers and speculators in determining oil price volatility via two distinct liquidity provision channels which have opposite effects on volatility. These liquidity provision channels remain significant determinants of oil volatility under different oil market conditions (normal/inverted), and different financial and business cycle risks environments.

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http://hdl.handle.net/10453/164383