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Uncertainty, Risk, and Opaque Stock Markets

Author

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  • José Gabriel Astaíza-Gómez

    (Área de Macroeconomía y Sistemas Financieros, Universidad EAFIT, Medellín 050030, Colombia)

Abstract

This study examined how uncertainty and global risk affect financial markets in emerging economies, focusing on foreign investment, CDS spreads, exchange rates, and stock return volatility. Using over 8.6 million ticker transaction observations and structural vector autoregression (VAR) models, the research found that increases in Economic Policy Uncertainty (EPU) significantly reduce foreign net buys, more than global market volatility (VIX). While global volatility drives CDS spreads, these spreads influence exchange rates, causing currency depreciation. The findings highlight the interconnectedness of uncertainty, global risk, and market instability, offering insights for managing risks in opaque markets and improving financial stability.

Suggested Citation

  • José Gabriel Astaíza-Gómez, 2025. "Uncertainty, Risk, and Opaque Stock Markets," IJFS, MDPI, vol. 13(1), pages 1-32, March.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:1:p:35-:d:1603949
    as

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