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The U.S. term structure and stock market volatility: Evidence from emerging stock markets

Author

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  • SADETTIN AYDIN YUKSEL

    (ISIK UNIVERSITY)

  • ASLI YUKSEL

    (BAHCESEHIR UNIVERSITY)

  • RIZA DEMIRER

    (Southern Illinois University Edwardsville)

Abstract

Decomposing the term structure of U.S. treasury yields into two components, the expectations factor and the maturity premium, we examine whether the U.S. term structure contains predictive information over emerging stock market volatility. Based on data from 20 emerging markets, we provide positive evidence that holds even after controlling for country specific factors including turnover and market size. Our findings indicate the market?s expectation of future short term rates, implied by the expectations factor, serves as a stronger predictor of stock market volatility compared to the maturity premium component of the yield spread. Moreover, the predictive power of the U.S. term structure increases following the global financial crisis.

Suggested Citation

  • Sadettin Aydin Yuksel & Asli Yuksel & Riza Demirer, 2019. "The U.S. term structure and stock market volatility: Evidence from emerging stock markets," Proceedings of International Academic Conferences 8710994, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iacpro:8710994
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    File URL: https://iises.net/proceedings/iises-international-academic-conference-copenhagen/table-of-content/detail?cid=87&iid=059&rid=10994
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    More about this item

    Keywords

    Term structure of interest rates; Stock market volatility; Expectations factor; Maturity premium.;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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